Declining Attendance And Rising Debt Will Undermine Long-Term Viability

Key Takeaways

• Shifts toward digital entertainment and demographic trends threaten long-term attendance and revenue growth, reducing the company's addressable market.
  
• High debt levels, underinvestment, and rising operational risks from climate change could further erode profitability and hinder sustainable earnings expansion.
  
• Stable guest demand, portfolio optimization, cost synergies, and tech-driven marketing are driving higher margins, operational efficiency, and long-term financial stability despite economic uncertainty.

Catalysts

Operates amusement parks and resort properties in North America.

• The increasing adoption of digital entertainment among consumers, particularly younger demographics shifting preferences toward gaming, streaming, and virtual experiences, is likely to erode demand for traditional theme park outings, leading to stagnating or declining attendance and overall revenue contraction.
  
• Demographic headwinds such as declining birth rates in key North American markets will reduce the pool of young families—historically Six Flags' core customer base—undermining long-term attendance growth and shrinking the company’s total addressable market, which could negatively impact future top-line expansion.
  
• Six Flags’ substantial debt burden and high leverage ratios create significant exposure to interest rate risk and refinancing pressures; as more of the company’s free cash flow is diverted toward debt service rather than reinvestment, the risk of margin compression and lower net earnings becomes increasingly acute, especially if revenue stagnates.
  
• Underinvestment in new attractions relative to emerging and intensifying competition from integrated resort destinations and other experiential leisure alternatives risks diminishing the company’s relevance, resulting in long-term loss of pricing power, weaker per-capita guest spending, and a negative trajectory for incremental EBITDA.
  
• Growing operational risk from climate change—manifesting in more frequent extreme weather events and higher insurance and maintenance costs—may reduce the number of viable park operating days and drive up fixed and variable expenses, severely limiting profitability and casting doubt on the sustainability of earnings growth.

Six Flags Entertainment Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on Six Flags Entertainment compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Six Flags Entertainment's revenue will grow by 8.6% annually over the next 3 years.
• The bearish analysts assume that profit margins will increase from -11.7% today to 5.8% in 3 years time.
• The bearish analysts expect earnings to reach $209.9 million (and earnings per share of $2.08) by about May 2028, up from $-328.4 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 26.5x on those 2028 earnings, up from -11.4x today. This future PE is greater than the current PE for the US Hospitality industry at 23.0x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 11.15%, as per the Simply Wall St company report.

Six Flags Entertainment Future Earnings Per Share Growth

Risks

• Robust secular demand for experiential, out-of-home entertainment continues to support stable or growing attendance, as highlighted by strong season pass sales, increasing group bookings, and no notable change in guest spending behaviors despite macroeconomic uncertainty, which could help maintain or lift revenue.
  
• Strategic focus on portfolio optimization, including the divestiture of non-core assets and reinvestment into high-growth parks, is expected to be cash flow accretive, reduce leverage, and modestly improve EBITDA margins, supporting long-term earnings and balance sheet strength.
  
• Aggressive, merger-driven cost synergies and structural resets—already exceeding original targets and aiming for an incremental $60 million in savings by 2026—are materially lowering recurring operating expenses, which should improve net margins even under inflationary pressure.
  
• Technology integration and ongoing investments in data analytics, CRM, and harmonized ticketing platforms are expected to significantly enhance targeted marketing, dynamic pricing, and in-park customer spend, leading to improved revenue per capita and greater operational efficiency.
  
• Upbeat indications from enhanced food and beverage programs, as well as the ability to dynamically add higher-value operating days in response to demand, point to opportunities for both volume growth and higher per-guest spending, potentially driving sustained top-line and EBITDA growth.

Valuation

• The assumed bearish price target for Six Flags Entertainment is $33.0, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Six Flags Entertainment's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $60.0, and the most bearish reporting a price target of just $33.0.
  
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be $3.6 billion, earnings will come to $209.9 million, and it would be trading on a PE ratio of 26.5x, assuming you use a discount rate of 11.1%.
  
• Given the current share price of $36.92, the bearish analyst price target of $33.0 is 11.9% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.