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Six Flags Entertainment CorporationNew York Stock Exchange: Fun) fell on Wednesday after Goldman Sachs issued some cautious comments about the theme park company while it was getting coverage.
Analyst Lizzie Dove warned that achieving revenue synergies could be difficult for the new company. “We “FUN is expected to achieve approximately 50% of the targeted revenue synergies, as we believe continued pricing power will be challenging amidst the volatile macroeconomic environment and slowing per capita trends,” it noted. However, the company points to a significant revenue opportunity for the SIX asset conversion. It noted that on a per-park attendance basis, Six Flags operates at 50% less than Cedar Fair.
While material margin opportunities are expected to be realized through cost synergies, the Company sees a risk that higher capital expenditures could erode some of the cost synergies. Looking ahead, the Six Flags-Cedar Fair merger creates an expanded portfolio of 42 parks and nine resorts across North America. It is important to note that no single geographic region will contribute more than 30% of park-level EBITDA, and no single geographic region will contribute more than 17% of park-level EBITDA. The geographic mix is expected to help smooth earnings, with the potential for weather disruptions.
Goldman Sachs has set a 12-month price target on FUN stock at $63.
Six Flags Entertainment (FUN) shares fell. 3.67% In afternoon trading, the stock was at $53.40. The theme park’s highest price since the merger was $58.70.