Each year Steven Halpern, editor of TheStockAdvisors.com, surveys the leading financial newsletter advisors asking for their favorite stocks for the coming year. This article is part of his 24th annual Top Picks Report.
Six Flags (NYSE: SIX) is the top conservative investment idea for 2007 from Chris Mayer, editor of Capital & Crisis. The advisor notes, "Six Flags is a great brand name, and about 34 million people visited its amusement and water parks last year. And they all come and spend money.
"Dan Snyder, the whiz-bang executive who made billions with Snyder Communications, took control of the company last November. He's also the guy who bought the Washington Redskins. In the time he's owned the Redskins, profits have tripled, and it's now the most valuable property in the NFL.
"One of the first things he did was hire Mark Shapiro to run the show at Six Flags. Shapiro was the No. 2 guy at ESPN. So he knows a few things about marketing and building up a media asset. Since he's joined Six Flags, he's brought on a bunch of executives and operators from ESPN and Disney.
"Best of all, he's put his own cash in the deal -- buying 250,000 shares for himself. The management team all told owns 12% of the company -- a major plus. In fact, insiders have been buying this company steadily.
"Six Flags' profit numbers are way down -- but it still did $300 million in EBITDA last year. This year, look for EBITDA to come in around $350 million. If you take 10 times that number, you get $3.5 billion for the whole company -- 30% higher than today's valuation.
"What's it all worth? At just 10 times projected 2007 EBITDA -- adding in some estimates for what its tangible asset base is worth, including the net operating losses -- it's not hard to get something between $16 and $20."
To see Chris' favorite speculative stock for 2007, click here.
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Reader Comments (Page 1 of 1)
12-29-2006 @ 9:46AM
Hardy Haberman said...
The Six Flags parks are a model of mismanagement. Maintanence is poor, the parks are dirty and litteres and the staff does not understand how to give the guest the optimum experience. If ESPN, a TV network who rarely has actual contact with its public can run them better, so be it. My guess is we will see more bean counting, less attention to the fun that makes a park atractive and a guest experience similar to being pushed through a series of cattle pens.
12-29-2006 @ 9:57AM
percapboy said...
This pick is a joke. Mngt keeps adding expenses and completely ignores the brands history(thrill rides). EBITDA will be lucky to cross 250 mil and the hits keep on coming!
12-29-2006 @ 12:14PM
richard grimm said...
I agree, the parks are old,same concrete walks for years,the parks add new rides but they are ad-ons, they are not disney type,the help needs help,not a pleasant experience, nice college and high school kids-they need more training, their water parks had agreat idea first season great and then the downfall, grabbing peoples money not inhancing the experience and charging more.
12-29-2006 @ 2:06PM
Rollercoaster Rob said...
I agree with the previous posters, this stock is going no where unless the company takes a drastic turn. The entire climate of the park changed once Premier Parks purchased the Six Flags Franchise. Many smaller parks under Premier became Six Flags properties. These parks are often small and contain very little when compared to the orignal properties.
Out of pocket costs by the guests is also way too high when compared to Cedar Fair or Bush Garden Properties. I live near Great Adventure and I would say the average cost to bring a family of four for a day would have to be easily $400.
I could go on for hours, but any change would have to occur over time and I do not see the possibility of positive change for the 2007 season, thus I feel this stock will still be a loser in 07.
12-29-2006 @ 2:23PM
Bil Davis said...
My family had a great experience at Six Flags parks in Chicago, St. Louis, and Dallas last summer. I thought the parks were clean, well maintained, and the staff was adequate. I don't think they'll ever have outstanding service when most of the employees are kids making minimum wage.
My biggest problem has been with the concession prices. It's outrageously expensive to have a meal or snack inside the park. A lot of people bring their own food and drink and go to the parking lot for lunch. Just dropping the prices a little should increase the volume of sales.
12-29-2006 @ 2:47PM
Bill Davis said...
I don't know about $400 a day. I bought season passes that cost $65 each. Season passes are good for all Six Flag parks. We spent seven days at the parks, so it was less than $50 a day admission for my family of five. That's an incredible value for all the fun we had.