A day after Six Flags Entertainment (SIX -0.26%) plummeted after a poor earnings report, a number of Wall Street analysts are out with reports saying they are not yet ready to give up on the theme park operator. The stock is bouncing back as a result, up as much as 11% in Friday trading.
Six Flags investors have been on a roller coaster of late. The company's second-quarter results sent shares plummeting, with attendance numbers down 22% year over year. The low attendance figures caused the company to significantly miss analyst expectations, reporting second-quarter revenue of $435 million compared to the $530 million consensus estimate.
The stock fell more than 20% on Thursday, but analysts added a little context to the results overnight. This year, as CEO Selim Bassoul said during the post-earnings call, "is a transitional year for Six Flags" as he shifts the focus away from getting as many people through the turnstiles as possible and toward building revenue per visitor.
And to his point, total guest spending per capita in the first half of 2022 was up 26% year over year.
Six Flags was the subject of at least six lowered price targets overnight, and KeyBanc analyst Brett Andress downgraded the stock, calling the quarter "indefensible." But others were more sanguine. Stifel analyst Steven Wieczynski lowered his price target and said he doesn't see much reason for optimism for 2022, but that he believes Bassoul's "strategy will ultimately prove correct."
Truist analyst Michael Swartz also lowered his price target, but said after Thursday's decline the stock is "not expensive."
It usually doesn't go well when a company asks Wall Street for patience, but in this case there is reason for long-term investors to buckle up and stay on board. As mentioned above, Bassoul has been open about the need to refine Six Flags' business to focus on park experience and generating more revenue from food sales and other amenities. Part of the way you accomplish those goals is to control ticket sales to make sure lines for popular rides and at the food court do not get out of hand.
Six Flags still has a lot going for it. The tourism company operates more than two dozen parks within a few hours drive of most North American major markets, making it an ideal destination for day trips. In a period of economic uncertainty and rising inflation, consumers might put off once-in-a-lifetime vacations, but could offset those with lower-budget days out.
The bull case isn't dead, but it will clearly take time to play out. On Friday, at least, it appears some investors are willing to go along for the ride.