Higher ticket prices hurt Six Flags Entertainment ( NYSE: SIX ), prompting analysts at William Blair to reduce their rating on the stock as management reorients their strategy.
The analysts noted that premiumization efforts forwarded by management helped drive a 43% decline in park attendance relative to 2019. While credit was given to the theme park’s executives for reassessing the strategy and correcting the mistakes made, equity analyst Ryan Sundby told clients that “recognizing there is a problem does not necessarily translate into having a solution readily available, particularly with management suggesting that it could take several years for attendance to recover to its optimal target levels.”
He added that a lack of formal guidance raises skepticism on the ability of the company to quickly correct issues. At the very least, it lacks the transparency that he and his team desire at the current juncture, necessitating a trimming of estimates toward more cautious levels.
“Given lower-than-anticipated attendance, we decreased our 2022 sales estimate by $55M, to $1.365B, and our corresponding adjusted EBITDA estimate by $25M, to $465M,” he explained. “We also cut our 2023 sales estimate by $110M, to $1.440B, and our corresponding adjusted EBITDA estimate by $50M, to $515M.”
Due to the estimate cuts and uncertainty on attendance trends , Sundby reeled in his rating to Market Perform from a prior Outperform rating. Shares of the Arlington, Texas-based park operator fell 3.96% shortly before Friday’s market open.
Read the earnings call transcript .
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Six Flags downgraded at William Blair after attendance erosion