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On Friday, Barclays (LON:BARC) initiated coverage on Six Flags (NYSE:SIX) Entertainment (NYSE: FUN), assigning an Overweight rating to the company’s stock along with a price target of $41.00. The stock, currently trading at $35.06, sits near its 52-week low of $33.83, having declined over 27% year-to-date. According to InvestingPro data, analysts expect both sales and net income growth this year. Barclays highlighted Six Flags’ consistent capital investments and the maintenance of clean, well-appointed parks with superior in-park operations and programming as key strengths that set the company apart from its competitors.
The firm noted that Six Flags’ commitment to quality does result in higher operational expenses, which has impacted margins and overall EBITDA growth despite outperforming in attendance figures. The company’s latest financial data shows EBITDA of $807.5 million and a gross profit margin of 40.6%, reflecting these operational challenges. Nonetheless, Barclays sees a range of self-help opportunities for Six Flags that could drive future growth. These include potential improvements at various Six Flags properties and the advantages stemming from the company’s large scale and diversification, such as the possible sale of some parks.
Barclays acknowledges certain risks associated with Six Flags, including the possibility of low returns on initial investments and a temporarily stretched balance sheet. However, the firm believes that the current stock valuation, which stands at 7.6 times the estimated 2025 enterprise value to EBITDA, provides a sufficient margin of safety. InvestingPro’s Fair Value analysis suggests the stock is currently fairly valued, with analyst price targets ranging from $45 to $64. Get access to 10+ additional exclusive ProTips and comprehensive valuation metrics with an InvestingPro subscription. This valuation accounts for the risks while still offering an attractive upside, according to Barclays.
The analyst from Barclays elaborated on the potential for Six Flags, citing a "long tail of low-hanging fruit" at the company’s properties that could be capitalized on. This, combined with other benefits from Six Flags’ unprecedented scale and diversification, positions the company for potential growth.
Despite the challenges, such as outsized operational expenses, Barclays maintains a positive outlook on Six Flags. The firm’s initiation of coverage with an Overweight rating reflects confidence in the company’s ability to leverage its self-help opportunities and deliver value to shareholders. For a deeper understanding of Six Flags’ financial health and growth potential, check out the detailed Pro Research Report available exclusively on InvestingPro, offering comprehensive analysis of this and 1,400+ other US stocks.
In other recent news, Six Flags Entertainment Corporation reported its fourth-quarter earnings with revenue totaling $687 million and an adjusted EBITDA of $209 million, slightly below Guggenheim’s expectations. The company has set its 2025 guidance, projecting adjusted EBITDA to range from $1.08 billion to $1.12 billion. Oppenheimer maintains its Outperform rating on Six Flags with a $60 price target, noting a 1% year-over-year revenue growth and an increase in adjusted EBITDA margins by approximately 466 basis points. Guggenheim also continues to recommend Six Flags as a Buy, though it lowered its price target from $55 to $50.
The company has announced the nomination of four new board members, including Sandy Cochran and Michael Colglazier, for its 2025 Annual Meeting of Stockholders. Additionally, Six Flags has scheduled this meeting for June 25, 2025, the first since its name change from CopperSteel HoldCo, Inc. Oppenheimer analysts highlight the potential for Six Flags to divest up to 12 smaller parks, a move that could focus efforts on larger parks contributing 90% of its EBITDA. The firm expects this strategy to help reduce Six Flags’ debt and enhance its financial position. These developments reflect Six Flags’ ongoing strategic initiatives and management’s guidance for future growth.
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