Six Flags Upgraded By Wedbush On 3 Positive Catalysts

Several positive catalysts led Wedbush to upgrade Six Flags Entertainment Corp SIX Wednesday.

The Analysts

James Hardiman upgraded Six Flags from Neutral to Outperform and raised the price target from $51 to $62.

The Thesis

"A number of potential catalysts line up nicely for Six Flags," Hardiman said in the Wednesday upgrade note. 

They include per capita spending improvements driven by the amusement park's Membership 2.0 program; a positive news flow from the company's international business; and easy weather comparisons, the analyst said. (See his track record here.) 

“While none of these are a sure thing, any of them likely results in meaningful upside to SIX shares, particularly given the sell-off of the past year that has resulted in a discounted valuation with respect to the sizable dividend." 

The Membership 2.0 initiative could "generate significant upside to per-capita spending," which “could in turn boost revenue and EBITDA numbers," he said. 

On the International front, Hardiman said investors have written off much of the opportunity for Six Flags after negative developments over the past nine months, but said the company has noted "the re-approval process is proceeding 'as planned'" for its Chongqing, China development.

Such an announcement could add $10-$15 million to Wedbush's EBITDA estimate, while another similar announcement on the Nanjing project could add another $10-$15 million, the analyst said. 

A park-by-park weather analysis conducted by the firm showed that Six Flags had comparable good weather days year-over-year through early June, he said. 

“This gives us confidence to upgrade SIX shares now, ahead of the bigger weather-related catalyst in 3Q." 

Price Action

SIx Flags shares were up 2.01% at $52.67 at the close Wednesday. 

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