Stock Analysis

Six Flags Entertainment Corporation (NYSE:SIX) Analysts Are More Bearish Than They Used To Be

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One thing we could say about the analysts on Six Flags Entertainment Corporation (NYSE:SIX) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon. At US$25.97, shares are up 6.4% in the past 7 days. It will be interesting to see if this downgrade motivates investors to start selling their holdings.

Following the latest downgrade, the current consensus, from the 13 analysts covering Six Flags Entertainment, is for revenues of US$1.5b in 2022, which would reflect a small 4.1% reduction in Six Flags Entertainment's sales over the past 12 months. Statutory earnings per share are presumed to rise 9.8% to US$1.78. Before this latest update, the analysts had been forecasting revenues of US$1.6b and earnings per share (EPS) of US$2.59 in 2022. Indeed, we can see that the analysts are a lot more bearish about Six Flags Entertainment's prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.

See our latest analysis for Six Flags Entertainment

NYSE:SIX Earnings and Revenue Growth August 17th 2022

It'll come as no surprise then, to learn that the analysts have cut their price target 26% to US$31.27. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Six Flags Entertainment at US$46.00 per share, while the most bearish prices it at US$20.00. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. One more thing stood out to us about these estimates, and it's the idea that Six Flags Entertainment's decline is expected to accelerate, with revenues forecast to fall at an annualised rate of 8.0% to the end of 2022. This tops off a historical decline of 5.6% a year over the past five years. Compare this against analyst estimates for companies in the broader industry, which suggest that revenues (in aggregate) are expected to grow 13% annually. So it's pretty clear that, while it does have declining revenues, the analysts also expect Six Flags Entertainment to suffer worse than the wider industry.

The Bottom Line

The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for Six Flags Entertainment. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. Given the scope of the downgrades, it would not be a surprise to see the market become more wary of the business.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Six Flags Entertainment analysts - going out to 2024, and you can see them free on our platform here.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.

Valuation is complex, but we're helping make it simple.

Find out whether Six Flags Entertainment is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.