On Thursday, Mizuho (NYSE:MFG) Securities adjusted its financial outlook for shares of Six Flags (NYSE:SIX) Entertainment (NYSE: FUN), increasing the stock's price target from $52.00 to $54.00. The firm maintained its Outperform rating on the amusement park company.
This decision follows Six Flags' third-quarter earnings before interest, taxes, depreciation, and amortization (EBITDA) meeting expectations and the company providing a fourth-quarter forecast that exceeded initial predictions.
The company's guidance for 2027 free cash flow (FCF) was described as "somewhat underwhelming" by the analyst, yet it was deemed acceptable considering the stock's compelling valuation. The analyst believes that the risk to estimates is more likely to be on the upside, suggesting that the projected '27 EBITDA may be on the conservative side.
The analyst's perspective includes a narrative that anticipates low single-digit growth in FUN attendance, mid-single-digit-plus growth in SIX attendance, and moderate pricing, balanced by pass growth and more than 50% flow-through, as well as cost and revenue synergies.
Six Flags' recent performance in October showed a significant uptick, surpassing expectations and indicating a solid sequential improvement from the third to the fourth quarter. The analyst attributed the positive trend primarily to weather conditions, with favorable temperatures and precipitation during the month.
Despite the recent decline in attendance, the improved October results have provided a spark of optimism for a potential turnaround in Six Flags' business operations.
The report highlighted that the recent attendance decline had set a low bar, but the October trends have contributed to a more hopeful outlook for the company's near-term performance. The analyst's comments reflect a belief that Six Flags has the potential to revitalize its business, driven by favorable weather conditions and strategic pricing and attendance initiatives.
In other recent news, Six Flags Entertainment Corporation reported mixed earnings results for the second quarter of 2024, with net revenues of $572 million and 8.6 million guests. Despite these figures, the Legacy Six Flags segment saw a decrease in both attendance and revenues. The company has also completed its merger with Cedar Fair (NYSE:FUN), L.P., expanding its presence in the regional theme park industry.
On the analyst front, Goldman Sachs adjusted its outlook on Six Flags, reducing the price target to $44 while keeping a Neutral rating. This decision was based on higher costs observed this quarter and the projection of minimal cash flow generation in the near term. Guggenheim initiated coverage on Six Flags with a Buy rating, setting a price target of $52.00, based on the company's robust portfolio and potential for revenue growth.
Deutsche Bank (ETR:DBKGn) maintained its Buy rating but reduced its price target from $65 to $58, while Oppenheimer revised its stock target for Six Flags from $67 to $60, maintaining an Outperform rating. JPMorgan, expressing concerns over elevated capital expenditure and potential pricing pressures, retained its Underweight rating on Six Flags.
In executive developments, Six Flags entered into new employment agreements with several of its top executives, detailing compensation, incentives, and severance terms. These developments provide crucial insights for investors, indicating the company's strategic direction following its recent merger.
InvestingPro Insights
Recent data from InvestingPro adds depth to Mizuho Securities' analysis of Six Flags Entertainment (NYSE: FUN). The company's market capitalization stands at $4.58 billion, with a P/E ratio of 94.4, indicating a high valuation relative to earnings. This aligns with the InvestingPro Tip that FUN is "Trading at a high earnings multiple."
Despite the high valuation, Six Flags has shown strong financial performance. The company's revenue for the last twelve months as of Q3 2024 was $2.39 billion, with an impressive revenue growth of 33.41% over the same period. This robust growth supports the InvestingPro Tip that "Analysts anticipate sales growth in the current year."
The company's profitability is also noteworthy, with a gross profit margin of 44.6% and an operating income margin of 20.67% for the last twelve months. These figures reinforce another InvestingPro Tip that "Analysts predict the company will be profitable this year."
Investors should note that FUN has demonstrated a "Strong return over the last month," with a 17.3% price total return over the past month. This recent performance, coupled with the company's financial metrics, provides context to Mizuho's increased price target and maintained Outperform rating.
For readers interested in a more comprehensive analysis, InvestingPro offers additional tips and insights on Six Flags Entertainment. In fact, there are 7 more InvestingPro Tips available for FUN, which could provide valuable context for investment decisions.
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