On Tuesday, JPMorgan initiated coverage on Six Flags (NYSE:SIX) Entertainment Corp (NYSE:FUN) stock, assigning the theme park operator an Underweight rating with a price target of $50.00.
The firm anticipates a compound annual growth rate (CAGR) of approximately 6% in top-line revenue through 2027, bolstered by an estimated 3% increase in attendance and a similar 3% rise in total per capita spending.
The analysis also projects a cost growth CAGR of around 4%, which could reach 7% excluding synergies. This rate exceeds the pre-pandemic mid-single-digit rate and is expected to support various initiatives.
The financial institution forecasts that these factors will translate into an EBITDA dollar growth of about 10% over the next three years, assuming full realization of $120 million in cost synergies.
The projected growth in earnings before interest, taxes, depreciation, and amortization (EBITDA) would result in an organic annual bottom-line growth profile of around 5%.
This projection is in line with the historical performance of Cedar Fair (NYSE:FUN), a legacy company in the industry, which from 2016 to 2019 saw a 5% top-line to 2% bottom-line adjusted EBITDA CAGR flow-through profile.
JPMorgan's analysis suggests that Six Flags is positioned to achieve a steady growth trajectory, mirroring industry standards set by comparable companies. The price target set by the firm reflects their expectations for the company's financial performance and market position by December 2025.
The Underweight rating indicates that JPMorgan analysts believe Six Flags shares may underperform relative to other equities in the sector or the broader market. Investors often use such ratings to inform their investment decisions alongside other research and market data.
In other recent news, Six Flags Entertainment Corporation and Cedar Fair have completed their merger, with Stifel and Truist Securities issuing Buy ratings for the newly formed entity.
Stifel's revised price target of $68 suggests a 30% upside, while Truist sets a bullish target of $62, indicating over 20% potential upside. Both firms' analyses are based on projected EBITDA for the upcoming years.
Significant leadership changes have been announced post-merger, with Selim Bassoul appointed as the Executive Chairman of the Board of Directors. Cedar Fair reported robust net revenues of $102 million, attributed to higher season pass sales and favorable weather conditions.
Analyst firms, including Oppenheimer, B.Riley, Deutsche Bank, Citi, Truist Securities, and Stifel, have maintained Buy ratings on Cedar Fair's stock, reflecting confidence in the strategic positioning and expected financial benefits from the merger. These recent developments highlight the evolving landscape of the amusement park industry.
InvestingPro Insights
As Six Flags Entertainment Corp (NYSE:FUN) navigates the twists and turns of the theme park industry, real-time data from InvestingPro offers additional insights into the company's financial health. With a market capitalization of approximately $4.37 billion and a P/E ratio of 17.44, the company presents an interesting case for investors. Notably, Six Flags has experienced a slight revenue growth of 0.7% over the last twelve months as of Q1 2024, with a more substantial quarterly revenue growth of 20.18% in Q1 2024.
InvestingPro Tips highlight that analysts are optimistic about Six Flags, anticipating net income and sales growth in the current year. This aligns with JPMorgan's projection of a steady growth trajectory for the company. However, the stock has been volatile recently, with a 1-month price total return showing a decline of 24.36%. It is also trading at a high earnings multiple, which could suggest that the stock is priced optimistically relative to its earnings.
Investors considering Six Flags should note that the company has been profitable over the last twelve months, and analysts predict it will remain profitable this year. For those looking to delve deeper, InvestingPro offers additional tips on Six Flags, providing a comprehensive analysis to inform investment decisions.
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