Six Flags is the proud owner of the world’s tallest roller coaster, ‘Kingda Ka’, but is this theme park stock a good investment right now?
Six Flags (NYSE: SIX) is the world’s largest regional theme park operator and North America’s largest water park operator. With more locations to choose from than any other theme park company, this is a firm family favorite for the holidays. Headquartered in Arlington, Texas, and with numerous other U.S. locations, it also has properties in Canada and Mexico. Despite being a major family highlight in the summer holidays, Six Flags had a rather rough time during the pandemic as restrictions halted the business for a number of months. Even now, its business and, consequently, its stock price is not quite back to pre-pandemic levels.
With restrictions easing and summer holidays ramping up again this year, is Six Flags a good investment?
The bull case for Six Flags
Six Flags might have suffered during the lockdowns last year, but 2021 has brought about a bit of a recovery and hopes of returning to full profits and growth for 2022.
Before COVID-19 the company generated around $1.5 billion in revenue annually, with just over 32 million visitors in a 12 month period. In comparison, 2021 saw 1.3 million visitors in Q1, which in comparison to 2019 is only a 39% decline in attendance and a 16% decline in comparison to 2020. This might seem like a negative, however, Easter weekend, a famously busy period, was not included in 2021’s Q1, but it was included in both 2019 and 2020’s first quarter. With this in mind, the figures are actually relatively healthy considering the ongoing restrictions that were still in place.
Q2 should mark even more improvement as lockdowns continue to ease and vaccinations rise. Indeed, by 2022, analysts predict that earnings will recover close to 2019 levels, with expectations of $1.97 per share. On top of that, the company has laid out plans to generate a further $80 million to $110 million in annual earnings over the next few years. This will hopefully give the company a 15-20% boost on pre-pandemic earnings and will improve the company’s long-term profitability.
The bear case for Six Flags
Much like that of Disney, Six Flags struggled during lockdowns. Unlike Disney, it is a regional-only theme park that cannot rely on lockdowns being lifted in other countries to bring in revenue elsewhere, nor can it fall back on a highly successful streaming service full of nostalgic characters.
As a result, Six Flags saw short-seller interest grow significantly throughout June. It grew from 4.42 million shares that were sold short on 31 May, to 5.2 million shares by 15 June, this was an increase of 18.1% in 2 weeks. On 5 July, the percentage of shares that were sold short was at 6.2.
Six Flags has a current market value of just over $3.5 billion, whilst its net outstanding debt is sitting not-so-pretty at $2.6 billion. This, in combination with the current nationwide staff shortage, could bring some strong headwinds for the company over the next year. However, with regards to its debt, Six Flags did successfully work with lenders to renegotiate its payment plans, ensuring the company has time to recover from the effects of the pandemic before any major repayments are expected.
So, should I invest in Six Flags?
Six Flags looks a bit risky at the moment, particularly with the increased short-seller interest, however, in the long term, the company is likely to recover well and fast. Despite the issues that the company has faced during the pandemic, it has its eyes on the future, even looking to improve upon pre-pandemic earnings. Moving forward, this would be a good buy for a long-term hold.
- Which Six Flags is the Biggest?
Six Flags Great Adventure & Safari park is the biggest Six Flags theme park at 510 acres. You can visit this theme park in Jackson, New Jersey.
- Who Is Mr. Six?
Mr. Six was the character that Six Flags used in advertising campaigns from 2004 to 2010. The character was portrayed by Danny Teeson a British dancer and choreographer.
- Are Six Flags season passes able to be used in all their theme parks?
No, season passes or memberships can only be used in your home park. For all parks access the holder must have a Gold Season Pass.
MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here.