On Monday, B. Riley Financial made a strategic adjustment to its rating on Six Flags (NYSE:SIX) Entertainment, moving it from Buy to Neutral, while setting a price target of $30. This decision follows a substantial increase in Six Flags shares, which have risen approximately 16% since the firm's last rating change on November 3, 2023.
The reevaluation of Six Flags' stock comes after comparing its performance to Cedar Fair (NYSE:FUN), L.P., which saw gains of around 11%, and the Russell 2000's increase of roughly 14%. The analyst at B. Riley pointed out that the shift in Six Flags' share price has altered the relative upside potential when compared to Cedar Fair.
The downgrade reflects concerns over regulatory approval risks associated with the proposed merger between Six Flags and Cedar Fair. The analyst noted that while the merger's potential benefits remain acknowledged, the regulatory hurdles could disproportionately affect Six Flags' valuation compared to Cedar Fair.
B. Riley's analysis suggests that Cedar Fair currently offers a more appealing investment opportunity, whether or not the merger proceeds. The firm emphasized that if the merger is completed, Cedar Fair is the preferred stock. Conversely, if the merger fails to receive approval, Six Flags may face downside risks.
The firm clarified that their revised stance is not an indication of diminished confidence in the merits of the merger. Instead, it is a strategic move based on the comparative risk-adjusted valuations of both companies and the potential outcomes of the merger's regulatory review process.
InvestingPro Insights
Following B. Riley Financial's recent adjustment to Six Flags Entertainment's rating, investors are keenly observing the company's financial health and stock performance. According to real-time data from InvestingPro, Six Flags' market capitalization stands at $2.16 billion, with a Price to Earnings (P/E) ratio of 27.25. Interestingly, when adjusted for the last twelve months as of Q3 2023, the P/E ratio presents a more favorable figure at 22.25.
InvestingPro Tips highlight that analysts expect Six Flags to be profitable this year, which is corroborated by the company's positive net income over the last twelve months. However, it's worth noting that the company's net income is anticipated to drop this year. Additionally, Six Flags does not pay a dividend to shareholders, which could influence the investment strategies of income-focused investors.
From a stock performance perspective, Six Flags has demonstrated volatility, with a one-month price total return of 12.19%, but a one-year price total return showing a decline of 8.33%. This volatility is an important consideration for investors, as reflected in one of the InvestingPro Tips.
For those looking for a deeper dive into Six Flags' financials and stock analysis, InvestingPro offers a comprehensive set of additional tips. Subscribers can access these valuable insights, especially now when the InvestingPro subscription is on a special New Year sale with discounts of up to 50%. To enhance your investment research, use coupon code SFY24 to get an additional 10% off a 2-year InvestingPro+ subscription, or SFY241 to get an additional 10% off a 1-year InvestingPro+ subscription.
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