The year is almost over, and investors will finally see the end of one of the most challenging bear markets in recent memory. Six Flags Entertainment (SIX 7.08%), down 48% year to date, won't emerge unscathed. Shareholders are worried about the company's massive debt load and constrained liquidity. But some think a real estate spinoff could put these problems in the rearview mirror.

With that said, here's a closer look at what investors might expect from Six Flags' stock heading into 2023. 

Six Flag's post-COVID difficulties 

Six Flags operates a portfolio of 27 parks across North America. It faced substantial challenges at the height of the COVID-19 pandemic because movement restrictions and park closures hindered operations. While business is back to normal, the company is still in a difficult spot.

Total revenue fell 21% as efforts to raise ticket prices may have led to a sharp decline in attendance. With just 8 million visitors in the period, guest traffic is down 33% from this time in 2021. While Six Flags remains profitable (with an adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $226 million), its long-term debt load of roughly $2.3 billion (compared to just $73 million in cash) means it might struggle to handle continued declines in its operations. 

With 70% of economists surveyed by Bloomberg expecting a recession in 2023, the company will be hard-pressed to avoid continued attendance erosions. Its luxury amusement park experiences are likely among the expenditures consumers will slash when money is tight. The good news is that some shareholders might have a solution. 

Could real estate sales save the day?

In December, an investment management company called Activist Land & Buildings bought a 3% stake in Six Flags and has begun pressuring its management to divest its real estate assets. The investor believes the land under Six Flags' parks is worth more than the company's entire $1.8 billion market cap and that unlocking this value could lead to a 100% upside in the share price. 

If such a deal goes through, it could involve selling the land to a real estate investment trust (REIT) only for Six Flags to lease it back to use in operations. While the company may resent the loss of control such a move would represent, it looks like a good idea. 

Red stock chart crashing through the ground as a business person looks on.

Image source: Getty Images.

The land sales would generate cash that Six Flags could use to pay off its debt and free up capital for improving guest experiences at its parks. The extra liquidity would also leave the company extremely well positioned to handle a potential recession and rising interest rates -- the later of which increases the cost of traditional debt financing. That said, it is unclear if management is interested in making this move. 

Is Six Flags stock a buy?

With a forward price-to-earnings (P/E) multiple of 13.4, Six Flags stock trades at a substantial discount to the S&P 500 average of 20. While that may catch the attention of deal-hungry investors, the shares aren't as good of a value as they look on the surface. 

High debt load, the threat of macroeconomic challenges like recession, and rising interest rates make Six Flags risky. Although a potential land sale could alleviate some of these problems, management may not take such a drastic move unless the situation gets more severe.