Morgan Stanley raised Six Flags Entertainment (NYSE:SIX) to Overweight from Equal-Weight in a note Thursday, also downgrading shares of SeaWorld Entertainment (NYSE:SEAS) to Equal-Weight from Overweight.
Analysts said in the note covering US theme parks that the firm remains bullish on US regional theme parks stocks at current levels, with a view that industry revenue growth accelerates in 2024 and drives outperformance amid macro concerns.
The SIX price target was raised to $32 from $29 per share, with analysts stating that the upgrade aligns with the investment bank's views on the pending merger with Cedar Fair L.P. (NYSE:FUN).
"We are aligning our rating for SIX shares with our bullish view on OW-rated FUN given the proposed merger. The low-double digit EBITDA growth profile for the combined FUN-SIX entity looks attractively priced here," said analysts.
"The revenue catch-up opportunity within the Six Flags footprint remains significant, and we believe a combined FUN-SIX entity will be better capitalized and positioned to help unlock this value," they added.
Meanwhile, the SEAS price target was lowered to $57 from $60 per share, with Morgan Stanley seeing competitive risks as a likely overhang into 2025.
"We remain constructive on SeaWorld's ability to benefit from an attractive and growing Orlando market, but rising competitive offerings from both Universal and Disney could create near-term risks to estimates," said analysts.
"The relative scale of Universal's upcoming Epic Universe – an estimated $4-5bn+ of capex coming online in Summer 2025, with over 100 acres of new theme park land compared for context with Disney's Galaxy's Edge at 14 acres – may be underappreciated in the stock."