Deutsche Bank (ETR:DBKGn) has reaffirmed a Buy rating on Six Flags (NYSE:SIX) Entertainment (NYSE: FUN), maintaining the stock's price target at $58.00.
The analyst anticipates a "noisy quarter" for the company, affected by a calendar shift and adjustments in operating days within the legacy Cedar Fair (NYSE:FUN) portfolio.
Specifically, there will be five fewer days during the peak June period in Q3 2024 compared to Q3 2023.
The analyst also expects soft visitation trends at legacy Six Flags parks following the merger that was finalized on July 1, 2024. This includes the impact of policy changes implemented within the legacy Six Flags portfolio at the time of the merger.
Despite these challenges, the analyst foresees positive commentary about the fourth quarter and Halloween-themed events across both portfolios.
While Six Flags management is not expected to provide a detailed 2025 outlook, updates on merger synergies and early pacing of 2025 season pass products, including the new "All Park Passport" super pass, are anticipated.
The analyst noted that the sentiment on Six Flags remains largely negative, with concerns about free cash flow generation in 2025 and 2026 and skepticism regarding the company's ability to improve performance at legacy Six Flags properties.
However, Deutsche Bank has expressed confidence in the management's ability to grow pro-forma combined adjusted EBITDA by more than 25% on a 2026 estimate versus the actual 2023 figures. The timeline for this growth between the 2025 estimate and the 2026 estimate remains somewhat uncertain.
In other recent news, Six Flags Entertainment Corporation reported mixed results for the second quarter of 2024, generating $572 million in net revenues and welcoming 8.6 million guests, an increase from the previous year. However, the Legacy Six Flags segment saw a decrease in attendance and revenues. The company also finalized its merger with Cedar Fair, L.P., positioning Six Flags as a significant presence in the regional theme park industry.
On the analyst front, Oppenheimer revised its stock target for Six Flags from $67 to $60, maintaining an Outperform rating. The firm cited concerns over potential consumer spending slowdowns and unexpected increases in capital expenditures.
Similarly, Deutsche Bank reduced its price target from $65 to $58, but maintained a Buy rating. Despite these revisions, JPMorgan (NYSE:JPM) retained its Underweight rating on Six Flags, expressing concerns over elevated capital expenditure and potential pricing pressures.
In executive developments, Six Flags entered into new employment agreements with several of its top executives, detailing compensation, incentives, and severance terms. The agreements came in the wake of the company's recent merger and include provisions for severance payments and benefits in the event of involuntary termination.
InvestingPro Insights
As Six Flags Entertainment (NYSE:FUN) navigates through a challenging period, InvestingPro data and tips provide additional context to Deutsche Bank's analysis. The company's market capitalization stands at $3.95 billion, with a P/E ratio of 22.2 over the last twelve months as of Q2 2024. This relatively high earnings multiple aligns with the InvestingPro Tip that suggests the stock is "trading at a high earnings multiple."
Despite the anticipated "noisy quarter" mentioned by the analyst, Six Flags has shown positive revenue growth. InvestingPro data reveals a 5.11% revenue growth over the last twelve months, with a more impressive 14.1% quarterly revenue growth in Q2 2024. This growth trend supports another InvestingPro Tip indicating that "analysts anticipate sales growth in the current year."
The company's profitability metrics are also noteworthy, with a gross profit margin of 44.92% and an operating income margin of 20.67% over the last twelve months. These figures support the InvestingPro Tip that Six Flags has been "profitable over the last twelve months."
For investors considering Six Flags' stock, it's worth noting that InvestingPro offers 7 additional tips that could provide further insights into the company's financial health and market position. These additional tips could be particularly valuable given the upcoming earnings report expected on November 6, 2024, and the ongoing integration challenges following the recent merger.
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