Wells Fargo analyst Timothy Conder maintained an Underweight rating on Six Flags Entertainment (SIX) and lowered his price target on shares to $30 from $38. The analyst said management's FY20 guidance de-risked shares significantly, but he sees minimal catalysts before the May28 investor meeting, and believes that short-term, "bulls will be disappointed" as it will take until at least mid-2021 for "strategy benefits to initially materialize post implementation" and higher opex levels will likely remain very "sticky" until 2022. Conder also does not think Six Flags will enter into a material real estate sale/leaseback transaction, which he noted some bulls believe will happen at the May 28 investor meeting.
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HIGHER: E-Trade (ETFC), up 24% after announcing Morgan Stanley (MS) will acquire the company in an all-stock transaction valued at approximately $13B. Under the terms of the agreement, E-Trade stockholders will receive 1.0432 Morgan Stanley shares for each E-Trade share, which represents per share consideration of $58.74 based on the closing price of Morgan Stanley common stock... Adesto Technologies (IOTS), up 55% after entering a definitive agreement for Dialog Semiconductor (DLGNF) to acquire all outstanding shares of the company for $12.55 per share in cash, or for approximately $500M enterprise value. UP AFTER EARNINGS: Domino's Pizza (DPZ), up 19%... TherapeuticsMD (TXMD), up 5%... Stamps.com (STMP), up 38%. DOWN AFTER EARNINGS: ViacomCBS (VIAC), down 9%... Southern Company (SO), down 2%... Six Flags (SIX), down 18%... Wix.com (WIX), down 10%. ALSO LOWER: L Brands (LB), down 11% after the company and Sycamore Partners announced a transaction that positions Bath & Body Works as a standalone public company and separates Victoria's Secret Lingerie, Victoria's Secret Beauty and PINK into a privately-held entity. Under the terms of the transaction, Victoria's Secret, with a total enterprise value of $1.1B, will be separated from L Brands into a privately-held company majority-owned by Sycamore. After taking into account certain liabilities, Sycamore will purchase a 55% interest in Victoria's Secret for approximately $525M. L Brands will retain a 45% stake in Victoria's Secret... Morgan Stanley, down 4% after acquiring E-Trade in an all-stock transaction valued at approximately $13B.
Jefferies analyst David Katz said in a flash note that guidance, the dividend, management and the board are all changing at Six Flags and he expects weakness in shares should continue. Under new leadership, Six Flags is providing annual guidance for the first time, instead of its historical long-term targets, and while the financial forecasts "appear to be set comfortably low," changes to management, board, and go-forward strategy are still forthcoming, which will all be key factors in where valuation is reestablished, Katz tells investors. For now he has a Hold rating and $32 price target on the stock, but Katz said he is reviewing his estimates pending the company's upcoming conference call.
During 2019, the company's partner in China defaulted on its payment obligations to the company. As a result, in February 2020 the company terminated the development agreements. It is unlikely that the company will recognize any revenue or income in 2020 related to the development of parks in China. In addition, the company has faced challenges in its base business, which excludes international development and the six U.S. parks the company began operating since 2018. In 2019, attendance, guest spending per capita, and revenue from the base business were flat, while Cash Operating Costs increased 2%, causing the Modified EBITDA of the base business to decline by $14M, or 3%. The Modified EBITDA margin of the base business declined by 107 basis points, as compared to the prior year. "My first ninety days have only reinforced my belief that Six Flags is a beloved brand with loyal guests and dedicated employees. Our company has difficult to replicate assets that provide a unique experience in themed entertainment, and exciting potential for profitable growth," said Mike Spanos, President and CEO. "I also believe that the company has the ability to improve its performance. We are working diligently to formulate a new strategic plan with the goal of restoring sustainable growth in attendance, revenue and profitability, and also to add directors with critical skills and experiences to our board. We will continue our consumer-centric approach, while focusing our organization on action, creativity, and relentless execution for the benefit of our guests, our employees, and our shareholders. I believe that Six Flags' future is bright, and I am excited to take on this new chapter with our great team."
Payable on March 11 to shareholders of record as of March 4. "Our board's decision to reduce the dividend was not taken lightly," said Richard Roedel, Chairman of the Board. "We believe this decision is in the best long-term interests of the company and our shareholders. Our new quarterly payout ensures sufficient free cash flow to cover the dividend, preserves financial flexibility to maintain a healthy balance sheet, and provides the ability to invest in our business."