Wirestock/iStock Editorial via Getty Images
Six Flags Entertainment Corporation (NYSE:FUN) dropped on Wednesday after Goldman Sachs issued some cautious comments on the theme park company as it picked up coverage.
Analyst Lizzie Dove warned that revenue synergies may be challenging to achieve for the new company. “We assume that FUN achieves ~50% of target revenue synergies as we believe continued pricing power will be tough amidst a choppy macro and decelerating per cap trends,” she noted. However, the firm does point to a significant revenue opportunity for turning around the SIX assets. It was noted that on an attendee per park basis, Six Flags is running ~50% below Cedar Fair.
While material margin opportunities through cost synergies are anticipated, the firm sees a risk that higher capital expenditures will eat into some of the cost synergies. Looking ahead, the Six Flags-Cedar Fair merger has created an expanded portfolio of 42 parks and 9 resort properties across North America. Importantly, no single geography will contribute more than 30% of park-level EBITDA, and no single park will contribute more than 17% of park-level EBITDA. The geographic mix is anticipated to help smooth out earnings, with weather disruptions inevitable.
Goldman Sachs assigned a 12-month price target on FUN of $63.
Shares of Six Flags Entertainment (FUN) fell 3.67% in late afternoon trading to $53.40. The high mark for the theme park stock since the merger is $58.70.