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On Thursday, JPMorgan analyst Matthew Boss adjusted the price target for Six Flags (NYSE:SIX) Entertainment (NYSE: FUN), reducing it significantly to $28.00 from the previous $46.00. Despite the change in the price target, the firm maintained its Underweight rating on the stock. The company’s shares, currently trading at $31.84, have declined over 33% year-to-date, with InvestingPro data showing the stock is currently trading below its Fair Value.
Six Flags Entertainment Corporation, known for its extensive portfolio of theme parks, was formed on July 1, 2024, through a merger with Cedar Fair (NYSE:FUN). The combined entity now boasts a total of 42 parks, including 27 amusement parks and 15 water parks. Alongside these, Six Flags operates additional attractions such as hotels, resorts, safaris, campgrounds, sports facilities, and marinas, bringing the total to 65 attractions. With revenue of $2.7 billion in the last twelve months and a market capitalization of $3.2 billion, the company maintains a significant presence in the entertainment industry.
The company is recognized for its strong position in the regional theme park industry, benefiting from geographic diversification and the potential to offer an enhanced value proposition to its guests. However, JPMorgan’s assessment indicates that the potential advantages and growth opportunities are already factored into the current valuation of the company. InvestingPro analysis reveals a ’Fair’ overall financial health score of 2.07 out of 5, with particularly strong metrics in relative value and financial health growth. Get access to 7 additional exclusive ProTips and comprehensive analysis through InvestingPro’s detailed research reports.
JPMorgan’s analysis highlighted several potential risks that Six Flags could face in the coming years. These include challenges in regaining attendance while potentially facing pressure on pricing for admissions and in-park purchases. Additionally, the firm noted that the company has an elevated underlying cost structure, which does not include the synergies of the merger, with each brand starting from different operational points.
The firm also pointed out concerns regarding a significant capital expenditure cycle that would be necessary to improve the Six Flags assets. This investment requirement is expected to pressure the company’s free cash flow and capital allocation decisions, especially given the current debt leverage, which stands at approximately 4.8 times.
In other recent news, Six Flags Entertainment has seen several analyst firms adjust their outlooks. Mizuho (NYSE:MFG) Securities lowered its price target from $54 to $49 but maintained an Outperform rating, highlighting mixed financial performance and cost-saving measures that contributed to a 5.5% year-over-year growth in EBITDA for its legacy FUN brand. Barclays (LON:BARC) initiated coverage with an Overweight rating and a $41 price target, emphasizing Six Flags’ capital investments and operational strengths, while acknowledging the impact of higher expenses on margins. Stifel also adjusted its price target from $64 to $52, maintaining a Buy rating and noting the potential resilience of the theme park industry despite economic pressures. Jefferies reduced its price target to $42 from $58, maintaining a Buy rating and noting the impact of a schedule shift for a popular festival on near-term financial projections. These developments reflect a cautious yet optimistic view from analysts regarding Six Flags’ future prospects.
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