J.P. Morgan analyst Matthew R. Boss reiterated an Underweight rating on the shares of Six Flags Entertainment Corp (NYSE:FUN) with a price forecast of $46.00.

FUN’s fourth-quarter EBITDA fell approximately 30% short of the Street’s estimate of $190 million.

The miss was driven by both revenue and cost discrepancies, with revenue increasing 3.6% year-over-year to $687 million, below the Street’s forecast of $704 million. According to the analyst, higher total costs resulted in an EBITDA margin of 19.0%, well below the Street’s 27.0% estimate.

On attendance, FUN reported a total of 10.7 million visitors, marking a 6.2% year-over-year increase, slightly missing the Street’s projected 6.5% growth.

Management explained that the 576,000 fewer visits at legacy Cedar Fair were due to a calendar shift, resulting in “core” Cedar Fair attendance growth of 8%.

Management reported positive early demand trends for fiscal year 2025, with a 2% year-over-year increase in attendance for the first two months.

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The analyst highlighted that management reiterated its target of 55 million attendees by 2027, describing 2025 as a volume-focused year that will contribute to long-term growth.

The company expects a 3% compound annual growth rate (CAGR) from 2025 to 2027, with 2025 likely below this average, while 2026 and 2027 should see higher growth, driven by ongoing investments to enhance the guest experience.

Management emphasized that in 2025, its primary focus is driving volume, which often involves being less aggressive on pricing, though price increases will still be considered.

As a result, growth in admissions per capita is expected to face downward pressure, likely resulting in negative year-over-year growth, compared to the Street’s forecast of +0.8%.

While the combined entity of FUN, with 42 parks, including 27 amusement parks and 15 water parks, is well-positioned within the regional theme park sector, benefiting from geographic diversification and the opportunity to enhance the guest experience, the analyst notes these advantages are already reflected in the current valuation.

Additionally, the analyst identifies several potential risks over the next few years, including: challenges in regaining attendance alongside possible pricing pressure on admissions and in-park spending, a higher cost base, excluding synergies, as the two brands are starting from different points, and an elevated capital expenditure cycle required to improve Six Flags’ assets, which could pressure free cash flow and capital allocation, especially given current debt leverage of around 4.8x.

Price Action: FUN shares are trading higher by 2.35% at $44.38 at the last check Friday.

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This article Six Flags' Stock Reflects Best-Case Scenario—Analyst Warns Of Growth & Cost Risks originally appeared on Benzinga.com

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