New Attractions And All Park Pass Aim To Enhance Guest Experience In 2025

Key Takeaways

• Cost synergies from the merger and strategic investments in infrastructure aim to streamline operations, boosting margins and potential free cash flow.
  
• Rising attendance and increased season pass sales indicate potential revenue growth, driven by new attractions and enhanced guest experiences.
  
• Wildfires, FX pressures, declining season pass sales, revenue growth challenges, and cost synergies are key factors potentially impacting Six Flags' financial performance.

Catalysts

Operates amusement parks and resort properties in North America.

• The merger has allowed Six Flags to capture cost synergies, with $50 million achieved in 2024 and a target of an additional $70 million in savings for 2025, primarily through streamlining operations and vendor rationalization, which is expected to improve margins.
  
• Early trends for the 2025 season indicate a 2% increase in attendance and a 3% increase in season pass sales, signaling potential revenue growth.
  
• Strategic capital investments are planned for 2025, with new major attractions at 11 of the 14 largest properties, aimed at increasing attendance and guest spending.
  
• Portfolio optimization efforts, including evaluating the potential sale of non-core assets and excess land, aim to generate cash flow and streamline operations long-term, which could positively affect free cash flow.
  
• Integration of ticketing systems and other infrastructure to support initiatives like the All Park Pass, which is in its early stages, aims to boost attendance and guest spending, impacting future revenue growth.

Six Flags Entertainment Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Six Flags Entertainment's revenue will grow by 11.0% annually over the next 3 years.
• Analysts assume that profit margins will increase from -8.9% today to 9.1% in 3 years time.
• Analysts expect earnings to reach $335.7 million (and earnings per share of $3.31) by about April 2028, up from $-242.2 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $381.7 million in earnings, and the most bearish expecting $290.9 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 25.0x on those 2028 earnings, up from -13.2x today. This future PE is greater than the current PE for the US Hospitality industry at 22.4x.
• 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 11.41%, as per the Simply Wall St company report.

Six Flags Entertainment Future Earnings Per Share Growth

Risks

• The recent wildfires in California could potentially impact attendance and revenues at high EBITDA properties like Knott's Berry Farm and Magic Mountain, which may affect the company's overall performance in 2025. [Revenue/Net Margins]
  
• The impact of foreign currency exchange rates on nondomestic parks could increase FX pressure on EBITDA, possibly affecting reported results if currency values fluctuate significantly. [Earnings]
  
• The sales of season passes and related products faced a modest decline at legacy Cedar Fair parks, driven largely by a timing issue. Any prolongation or deeper downturn in sales could affect the company’s financials. [Revenue]
  
• Higher attendance figures alongside lower admission per cap revenue due to increased season pass and group ticket sales might pressure overall revenue growth despite increased attendance. [Revenue/Margins]
  
• Leveraging operating efficiencies and achieving targeted cost synergies is crucial; any shortfall in capturing cost synergies could impact EBITDA margin improvements and earnings projections. [Net Margins/Earnings]

Valuation

• The analysts have a consensus price target of $49.714 for Six Flags Entertainment based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $62.0, and the most bearish reporting a price target of just $41.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $3.7 billion, earnings will come to $335.7 million, and it would be trading on a PE ratio of 25.0x, assuming you use a discount rate of 11.4%.
• Given the current share price of $31.84, the analyst price target of $49.71 is 36.0% higher.
• 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.