S&P 500   3,852.36
DOW   32,920.46
QQQ   306.18
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Europe bans Russian diesel, other oil products over Ukraine
Biden's State of the Union to tout policy wins on economy
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How will EU ban and West's price cap on Russian diesel work?
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Cash Holders STILL Aren't Taking Steps to Prepare (Ad)
It wasn’t me: Ex-UK PM Truss blames 'system' for her failure
'Knock at the Cabin' knocks off 'Avatar' at the box office
S&P 500   3,852.36
DOW   32,920.46
QQQ   306.18
Route to Super Bowl dangerous for Mexico's avocado haulers
Cash Holders STILL Aren't Taking Steps to Prepare (Ad)
Europe bans Russian diesel, other oil products over Ukraine
Biden's State of the Union to tout policy wins on economy
Cash Holders STILL Aren't Taking Steps to Prepare (Ad)
How will EU ban and West's price cap on Russian diesel work?
Evacuations urged in Ohio town as train wreck smolders
Cash Holders STILL Aren't Taking Steps to Prepare (Ad)
It wasn’t me: Ex-UK PM Truss blames 'system' for her failure
'Knock at the Cabin' knocks off 'Avatar' at the box office
S&P 500   3,852.36
DOW   32,920.46
QQQ   306.18
Route to Super Bowl dangerous for Mexico's avocado haulers
Cash Holders STILL Aren't Taking Steps to Prepare (Ad)
Europe bans Russian diesel, other oil products over Ukraine
Biden's State of the Union to tout policy wins on economy
Cash Holders STILL Aren't Taking Steps to Prepare (Ad)
How will EU ban and West's price cap on Russian diesel work?
Evacuations urged in Ohio town as train wreck smolders
Cash Holders STILL Aren't Taking Steps to Prepare (Ad)
It wasn’t me: Ex-UK PM Truss blames 'system' for her failure
'Knock at the Cabin' knocks off 'Avatar' at the box office
S&P 500   3,852.36
DOW   32,920.46
QQQ   306.18
Route to Super Bowl dangerous for Mexico's avocado haulers
Cash Holders STILL Aren't Taking Steps to Prepare (Ad)
Europe bans Russian diesel, other oil products over Ukraine
Biden's State of the Union to tout policy wins on economy
Cash Holders STILL Aren't Taking Steps to Prepare (Ad)
How will EU ban and West's price cap on Russian diesel work?
Evacuations urged in Ohio town as train wreck smolders
Cash Holders STILL Aren't Taking Steps to Prepare (Ad)
It wasn’t me: Ex-UK PM Truss blames 'system' for her failure
'Knock at the Cabin' knocks off 'Avatar' at the box office

Six Flags is a Ride You Don’t Want to Get Stuck On

Key Points

  • Six Flags Entertainment is riding positive investor sentiment on a day when it delivered a poor earnings report. 
  • Revenue and earnings are falling on a year-over-year basis and are below pre-pandemic levels. 
  • Recession fears are weighing on the minds and wallets of its core consumers. 
  • Until the outlook becomes clear, it’s best to avoid SIX stock.  
  • 5 stocks we like better than Six Flags Entertainment
Six Flags is a Ride You Don’t Want to Get Stuck On

Six Flags Entertainment (NYSE:SIX) is up over 13% on a day when the market is staging a relief rally of epic proportions. It shouldn’t be. The company posted earnings that confirmed a trend of two consecutive quarters where revenue and earnings are lower on a year-over-year basis.  

Revenue came in about 8% lower than estimates at $504.83 million. That was a far cry from the $638 million it generated in 2021. And it was also below the $621 million Six Flags delivered in 2019.  

Earnings were a similar story. Profits were down nearly 13% (12.86%) at $1.39 per share. That was below the $1.80 it delivered in the same quarter in 2021, and the $2.11 it delivered in 2019.  

So, the bump in the company’s stock is likely the effect of investor exuberance over a lower-than-expected CPI number and the likelihood of gridlock in Washington D.C. 

But like a good roller coaster ride, that type of adrenaline rush is fleeting. And investors need to be careful about their next move with SIX stock. 

Recessions Make Liars of us All 

Well, maybe not all of us. But I had predicted brighter days ahead for Six Flags when I wrote about the stock for MarketBeat in mid-summer 2021. At the time, the company hadn’t posted its second-quarter earnings, and I bullishly predicted that revenue numbers would surprise to the upside.  

And for a few quarters, they did just that. Operations were getting back to pre-pandemic levels. And when I wrote about Six Flags competitor Cedar Fair (NYSE:FUN) in August, I suggested that the good times may keep rolling. When money is tight, theme parks can provide family entertainment that’s only one gas tank away.  


But that’s where inflation enters the story. Revenue and earnings aren’t bad, but they’re lighter on a year-over-year basis. And they’re lighter from pre-pandemic levels. The company is somewhat shielded from inflation because the two biggest cost drivers (building its parks and new attractions) are fixed. And consumers are used to paying more so increasing prices of food and beverages inside the parks can work.  

However, now that the economy is in a recession by accepted standards, consumers seem to be pulling back even more. And that makes me less thrilled about the prospects for SIX stock. 

Debt Hangs Over the Company 

I love amusement parks. But it’s a tough business in good times and in the last recession Six Flags went bankrupt. I’m not suggesting that will happen now. But the company reported $2.28 billion of long-term debt compared to only $74.8 million in cash and cash equivalents.  

That signals that more capital will be needed to fund operations as the company gets into the slower part of the year. And with interest rates still on the rise those dollars will be much more expensive.  

Ahead of the earnings report, David Katz of Jefferies Financial Group downgraded SIX stock and lowered the price target to $24 per share. That takes away most of the upside that the stock offered. And once the market digests this earnings report, it’s likely that more downgrades will follow.  

A range of outcomes are in play for the economy in 2023. But consumers will need to see evidence of a turnaround before they adjust their spending habits. Going downhill on a roller coaster is fun, but it’s better to sell SIX stock now and look to buy it when the outlook is clearer.  

 

Should you invest $1,000 in Six Flags Entertainment right now?

Before you consider Six Flags Entertainment, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Six Flags Entertainment wasn't on the list.

While Six Flags Entertainment currently has a "Hold" rating among analysts, top-rated analysts believe these five stocks are better buys.

View The Five Stocks Here

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Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Six Flags Entertainment (SIX)
2.3556 of 5 stars
$28.21+0.9%N/A24.75Hold$29.27
Cedar Fair (FUN)
1.9017 of 5 stars
$44.08+1.3%2.72%9.36Moderate Buy$51.50
Compare These Stocks  Add These Stocks to My Watchlist 

Chris Markoch

About Chris Markoch

Contributing Author: Retirement, Individual Investing

Chris Markoch is a freelance financial copywriter with over five years of experience covering various aspects of the financial markets. You may find his writing a little different than other stock articles you’ve read. And that’s OK with him. Chris doesn’t have a traditional finance background. What he does bring to the table is a strong business and marketing background having worked for agencies that serviced Fortune 500 companies. With that in mind, he isn’t overly impressed with what companies say, and more focused on what they do. And because buyer behavior dictates so much of what happens with a stock, Chris always keeps the end consumer close in mind. Chris has been writing for MarketBeat since 2018.

Contact Chris Markoch via email at CTMarkoch@msn.com.

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