On Tuesday, Oppenheimer adjusted its price target for Cedar Fair (NYSE: NYSE:FUN) shares, a well-known amusement park operator, from $49.00 to $67.00. The firm also reaffirmed its Outperform rating for the company's stock. The revision reflects Oppenheimer's optimism about the potential value of the legacy Six Flags (NYSE:SIX) assets under Cedar Fair's experienced management.
The report from the analyst at Oppenheimer indicates that Cedar Fair's management team is positioned to unlock significant upside from the Six Flags properties. The anticipated cost synergies, which are estimated to reach $120 million, have already seen partial realization, with $40 million in efficiencies independently identified and acted upon.
Cedar Fair has reportedly experienced a strong beginning to the season pass selling period, with favorable weather conditions contributing to this success. Furthermore, the company has been adjusting its pricing strategy for the legacy Six Flags parks, aiming to find the right balance after previous fluctuations in pricing levels.
The new price target of $67 is based on a projected 9.7 times multiple of the estimated 2024 earnings before interest, taxes, depreciation, and amortization (EBITDA) and a 9.3 times multiple for 2025, factoring in the full $120 million in synergies. These multiples align with Cedar Fair's pre-pandemic five-year average multiple of 9.8 times and sit below that of Six Flags, which has a historical multiple of 12.8 times.
Investors and market watchers have taken note of this development as it signals confidence in Cedar Fair's strategic direction and potential for growth. Cedar Fair's stock performance and business outlook will continue to be monitored closely following this updated assessment from Oppenheimer.
In other recent news, Cedar Fair and Six Flags Entertainment Corporation are moving forward with their planned merger, set to finalize on July 1, 2024. The combined entity will be named Six Flags Entertainment Corporation. This merger is expected to enhance the entertainment experience for guests across North America and drive growth and innovation, leveraging Cedar Fair's guest experience and Six Flags' attraction designs.
Cedar Fair has also set a consent payment date for note holders in connection with the merger. The payment, part of the terms agreed upon in the Consent Solicitation Statement, will be dispensed to holders of the company's senior notes due in 2025, 2027, 2029, and 2028.
Furthermore, Six Flags has declared a special dividend of $1.53 per share, payable to stockholders on the merger's completion date. Richard Zimmerman, Cedar Fair's current President and CEO, will assume the same role in the merged company.
Cedar Fair recently reported strong financial results, with net revenues reaching $102 million. This performance was attributed to higher season pass sales and favorable weather conditions.
Analyst firms B.Riley, Deutsche Bank (ETR:DBKGn), Citi, Truist Securities, and Stifel have maintained Buy ratings on Cedar Fair's stock, reflecting confidence in the company's strategic positioning and the expected financial benefits from the merger.
InvestingPro Insights
Recent data from InvestingPro aligns with Oppenheimer's positive outlook on Cedar Fair (NYSE: FUN). With a market capitalization of approximately $2.67 billion and a forward-looking P/E ratio that has adjusted to a more attractive 16.21 for the last twelve months as of Q1 2024, the company's valuation metrics suggest a potential for investment consideration. Notably, Cedar Fair has seen a revenue growth of 20.18% in Q1 2024, indicating a robust start to the year, which complements the strong season pass sales mentioned in the analyst report.
InvestingPro Tips further highlight Cedar Fair's strong performance, with the company achieving a significant 20.83% return over the last month and an impressive 26.45% over the last three months. Additionally, analysts on InvestingPro predict that the company will be profitable this year, which is a testament to the effective management and strategic initiatives in place. For investors looking for more comprehensive analysis, there are 5 additional InvestingPro Tips available, which can be accessed with a subscription. Use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, offering a deeper dive into Cedar Fair's financial health and market position.
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