On Thursday, Deutsche Bank maintained a Buy rating on Six Flags Entertainment (NYSE:SIX) and raised its shares price target to $29 from $27. The price target increase follows the recent shareholder vote where over 99% of votes cast, representing 81% of eligible voting shares, were in favor of Six Flags' proposed merger with Cedar Fair Entertainment (NYSE:NYSE:FUN).
The merger is now pending regulatory approval, after the Department of Justice requested additional information from both companies on January 23, which extended the waiting period mandated by the Hart-Scott-Rodino Antitrust Improvements Act.
Cedar Fair's management, during their fourth-quarter 2023 earnings call on February 15, expressed confidence in completing the merger in the first half of 2024, contingent on receiving necessary approvals.
In the interim, attention remains on Six Flags' operational performance as the company prepares for the seasonal opening of most of its parks next month. Analysts suggest that extrapolating fourth-quarter 2023 results to the first quarter of 2024 may be of limited value due to comparability challenges posed by "13 Plus" revenue.
This revenue stream created a 5% gap between reported and comparable per capita spending in the fourth quarter of 2023 and is expected to impact revenue by $14 million in the first quarter of 2024.
Despite these challenges, the pace of pass sales for 2024 appears strong, showing year-over-year growth in both units and pricing during the August 2023 to January 2024 selling period. With the anticipation of more favorable weather patterns in the spring and summer, Six Flags is projected to experience a rebound in attendance, which is estimated to reach 76% of 2019 levels in the updated model, a significant increase from the 62% trough in 2022.
The positive outlook for Six Flags is further supported by a favorable macroeconomic environment and reduced inflationary pressures on margins. The analyst's decision to shift to 2025 estimates as the base year for valuation also contributed to the increased price target for Six Flags shares.
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