SIX - Six Flags drifts lower after Jefferies downgrades due to rough economic outlook

Jefferies turned cautious on Six Flags Entertainment Corporation ( NYSE: SIX ) with a downgrade to a Hold rating from Buy.

While analyst David Katz and team see SIX is a fixer-upper-execution story, the economic backdrop is called challenging and too hard to ignore.

"Based on the increasingly negative economic outlooks and our expected transition 3Q22 for SIX, we believe a more conservative approach is warranted. Although our prior 8X EBITDA target multiple remains and is historically low, the prospects for a recession impacting growth in 2023 is increasing which drives our revision to below-consensus estimates. We believe long-term upside is still possible, but near-term earnings power is challenge."

Jefferies set long-term revenue and adjusted EBITDA estimates below expectations with the economic recovery expected to take time to play out.

The firm's price target on SIX of $24 is baed on blended 2023/2024 EV/EBITDA, AFFO/share and FCFE/share multiples of 8X, 15X and 10X, respectively. Historically, SIX shares are noted to have traded around 13X forward EBITDA, which Katz thinks could be the case again pending demonstrated execution from management, improved visibility, and a more secure macro environment.

Shares of Six Flags ( SIX ) fell 1.56% in premarket aciton to $20.83.

The Seeking Alpha Quant Rating on SIX is flashing Sell.

For further details see: