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.
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