Key Points
Six Flags is selling off seven of its 41 amusement parks.
The deal should yield $331 million in new cash -- and much less capital spending.
Amusement park operator Six Flags Entertainment (NYSE: FUN) stock declined 5.5% through 10:55 a.m. ET Friday -- on apparently good news.
In a note covered on StreetInsider yesterday afternoon, Stifel analyst Steven Wieczynski reiterated his "buy" rating and $25 price target on Six Flags stock.
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Six Flags' big news
Six Flags announced yesterday it will sell seven of its amusement parks to EPR Properties(NYSE: EPR) for $331 million.
The properties getting unloaded include:
- Valleyfair (Minneapolis)
- Worlds of Fun (Kansas City)
- Michigan's Adventure (Grand Rapids)
- Schlitterbahn Waterpark Galveston (Galveston)
- Six Flags St. Louis (St. Louis)
- Six Flags Great Escape (Queensbury)
- and Six Flags La Ronde (Montreal).
Combined, they produced $260 million in revenue and $45 million in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for Six Flags in 2025. This money will no longer recur for Six Flags -- and that's OK, says Wieczynski.
What Stifel says about Six Flags
"Some might disagree with us," begins the Stifel note -- indeed, some clearly do disagree, given the share price decline! Nevertheless, Wieczynski argues this sale is good news for Six Flags stock.
The parks in question were "underutilized" and "non-core," says the analyst. They accounted for "only ... 6% of total company EBITDA," but "needed significant capital," and so were actually a drain on profits. Selling them off, and reinvesting the cash in the company's 34 other, more promising parks, could create "significant upside to current trading levels."
Is Six Flags stock a buy?
Capex was a huge expense for Six Flags last year -- $480 million in total, pushing the company into negative free cash flow for the first time ever (excluding the Pandemic year 2020). Lightening that load could be just the catalyst Six Flags needs to become a fun stock to own again.
Should you buy stock in Six Flags Entertainment right now?
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends EPR Properties and Six Flags Entertainment. The Motley Fool has a disclosure policy.
