Goldman Sachs Reiterates Buy Rating on Six Flags (SIX)

Goldman Sachs reiterated a Buy rating on Six Flags Entertainment (NYSE: SIX) with a price target of $44. Comments follow strong Q3 results. Analyst Afua Ahwoi thinks the stock can continue higher.

"(1) We think SIX can continue to raise prices (our pricing surveys suggest SIX’s season pass prices are about 19% below Cedar Fair’s). Also our analysis of the per-hour cost of various “staycation” options suggests that, at $5.00 per hour, a trip to a regional amusement park is one of the cheapest options for a consumer. (2) SIX is committed to raising the dividend and buying back stock. With the 11% dividend increase, the current dividend yield of 6.0% is very compelling. (3) We view positively SIX’s new “aspirational” target of achieving $600mn of modified EBITDA by 2017E. While the target might appear lofty, we believe it is achievable," said Ahwoi.

"Our forecast of pricing, in-park spend and attendance CAGR is 4%, 4% and 1.0% from 2014-2016E. This is not aggressive given in 2011-2014E SIX achieved pricing, in-park spend and attendance CAGR of 3.9%, 2.0% and 1.1%. We believe international management and franchising opportunities can help SIX reach this target. We are raising our 2014E-2016E adjusted EBITDA estimates to $439mn, $476mn and $511mn, respectively, following the earnings beat and taking into consideration the 2017E aspirational target," he added.

For an analyst ratings summary and ratings history on Six Flags Entertainment click here. For more ratings news on Six Flags Entertainment click here.

Shares of Six Flags Entertainment closed at $34.50 yesterday.

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