Six Flags Entertainment Corp (NYSE: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.
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.
Six Flags shares are up 1.36% Tuesday afternoon, trading around $53.01.
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