One thing we could say about the analysts on Six Flags Entertainment Corporation (NYSE:SIX) – they aren’t optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon.

Following the latest downgrade, the current consensus, from the 14 analysts covering Six Flags Entertainment, is for revenues of US$412m in 2020, which would reflect a sizeable 59% reduction in Six Flags Entertainment’s sales over the past 12 months. Losses are supposed to balloon 534% to US$3.95 per share. Yet prior to the latest estimates, the analysts had been forecasting revenues of US$652m and losses of US$1.79 per share in 2020. Ergo, there’s been a clear change in sentiment, with the analysts administering a notable cut to this year’s revenue estimates, while at the same time increasing their loss per share forecasts.

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There was no major change to the consensus price target of US$22.25, signalling that the business is performing roughly in line with expectations, despite lower earnings per share forecasts. There’s another way to think about price targets though, and that’s to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on Six Flags Entertainment, with the most bullish analyst valuing it at US$30.00 and the most bearish at US$16.00 per share. This is a fairly broad spread of estimates, suggesting that the analysts are forecasting a wide range of possible outcomes for the business.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. These estimates imply that sales are expected to slow, with a forecast revenue decline of 59%, a significant reduction from annual growth of 2.5% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 20% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining – Six Flags Entertainment is expected to lag the wider industry.

The Bottom Line

The most important thing to note from this downgrade is that the consensus increased its forecast losses this year, suggesting all may not be well at Six Flags Entertainment. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Six Flags Entertainment’s revenues are expected to grow slower than the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn’t be surprised if investors were a bit wary of Six Flags Entertainment.

With that said, the long-term trajectory of the company’s earnings is a lot more important than next year. We have estimates – from multiple Six Flags Entertainment analysts – going out to 2024, and you can see them free on our platform here.

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