On Monday, Jefferies, a global investment banking firm, initiated coverage on Six Flags (NYSE:SIX) Entertainment stock, a popular theme park company traded under the ticker NYSE: FUN, with a Buy rating and a price target set at $59.00.
Currently trading at $47.26, the stock has shown strong momentum with a 21.8% return over the past year, according to InvestingPro data. The firm sees the recent merger between Six Flags and Cedar Fair (NYSE:FUN) as an opportunity that could yield significant long-term benefits.
According to the initiating analyst, the combined entity, referred to as NewCo, is poised to capitalize on the potential earnings and achieve the projected $200 million in synergies by the end of 2026. The analyst noted that while the deal involves certain complexities related to integration and a high leverage ratio, with net debt to EBITDA at 4.9 times as of the third quarter of 2024, the market's current valuation appears to overly discount these challenges.
InvestingPro analysis shows the company maintains a "GOOD" overall financial health score, despite short-term obligations exceeding liquid assets.
The firm's analysis suggests that the market is overreacting to the risks associated with the merger, as evidenced by the approximately 7 times enterprise value to EBITDA ratio projected for the fiscal year 2026. This valuation is based on the company's financial performance and the anticipated benefits of the merger.
Jefferies' Buy rating indicates a positive outlook on Six Flags' stock, suggesting that investors could benefit from the stock's performance if the company successfully navigates the post-merger integration process and achieves its financial targets.
The coverage initiation by Jefferies provides investors with a new perspective on Six Flags' future, especially in light of the recent merger with Cedar Fair. The investment firm's price target of $59.00 offers a view on the stock's potential value based on the expected synergies and earnings potential of the combined companies.
In other recent news, Six Flags Entertainment Corporation reported third-quarter revenue of $1.348 billion and modified EBITDA of $583 million. This performance prompted Guggenheim to maintain a Buy rating on Six Flags and increase the price target to $55 from $52. The company also experienced a 20% year-over-year growth in attendance during the first five weeks of the fourth quarter, reaching 6.5 million visitors.
On the back of these developments, Six Flags' management provided guidance for fourth-quarter EBITDA to be between $205 million and $215 million. The company has also outlined long-term strategies to enhance financial health and guest experience, including cost synergies for margin expansion and disciplined park investments.
Six Flags has announced plans to invest over $1 billion in park enhancements over the next two years, aimed at enriching the guest experience at its 42 parks. The 2025 season will feature seven new roller coasters and an expanded lineup of seasonal events, while the 2026 season will see further enhancements, including a record-breaking water ride at Carowinds, a new water attraction at Canada's Wonderland, and a unique coaster at Six Flags Magic Mountain. These updates are part of the company's strategic roadmap, emphasizing long-term growth and sustainability.
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