Wells Fargo Upgrades Six Flags, Sees More Upside Ahead

Six Flags Entertainment Corp SIX is receiving an upgrade on brighter days ahead.

The Analyst and Rating

Wells Fargo analyst Timothy Conder raised his rating from Market Perform to Outperform and raised his price target from $52 to $56.

The Thesis

Despite potential volatility around Six Flags’ upcoming second-quarter earnings report on July 24, Conder believes modest multiple re-expansion will come from potential upside catalysts of improved weather entering July-August months, upward Street revisions to China and improved understanding of tax related cash flow.

The analyst says investors should consider the regional price/value "getaway" proposition offered to consumers by Six Flags parks in a slow growth U.S. economic environment, International licensing and monetization potential of undeveloped land adjacent to existing parks.

Conder says after re-examining cash tax assumptions for 2019/2020, capital expenditure expensing combined with the ability to keep prior accelerated depreciation will minimize cash taxes to a greater degree (~$65 million-$70 million per year) than he had previously assumed.

“This should also enable a more gradual ramp to full statutory rates through 2024 providing enhanced confidence toward modest dividend growth and share repurchases,” Conder wrote in the note.

Price Action

Six Flags shares are up 1.36% Tuesday afternoon, trading around $53.01.

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