Six Flags Initiated Sell at Goldman Due to Virus Impact

Six Flags shares were initiated sell at Goldman, which said the park operator is exposed to areas with the highest rates of coronavirus infection.
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Six Flags Entertainment  (SIX) - Get Report is exposed to areas seeing the highest rates of coronavirus infections, according to Goldman Sachs, which initiated coverage of the theme park-operator with a sell rating.

Shares of the Grand Prairie, Texas, company were at last check tumbling 8.4% to $25.06.

Goldman Sachs said in a report that Six Flags "has exposure to states and regions that currently face the highest rates of covid-19 infection and economic pressures."

Six Flags, the report said, "has been vocal in the need to reinvest in the park experience and attractions to reinvigorate growth (even before covid-19 impacts were felt), which likely limits flow-through on reopening."

"Our more cautious view on SIX would be proven wrong if leisure demand rebounds faster than anticipated and social distancing has less of an impact on parks," the report said. 

Both of those factors "would drive upward revisions for the entire group and a potential multiple re-rating for SIX."

Six Flags suspended operations at all its North American parks to help curb the spread of the disease. On Tuesday Six Flags said its Frontier City park in Oklahoma City will reopen with limited capacity on June 5.

The company owns and operates about 26 parks in the U.S., Mexico and Canada. 

Goldman also initiated coverage of Cedar Fair  (FUN) - Get Report with a buy rating and SeaWorld Entertainment  (SEAS) - Get Report with a neutral rating. 

The reported noted that the amusement parks were facing pressures similar to those facing the gaming, lodging and leisure sector.

"Longer-term, the amusement park industry has been outpacing most forms of discretionary spending, but growth has been entirely driven by destination parks capable of leveraging new franchise concepts that are also consumed at home (i.e., Universal’s (CMCSA) - Get Report Wizarding World of Harry Potter, Disney’s (DIS) - Get Report Pandora and/or Star Wars: Galaxy’s Edge)," the report said. 

At the same time, the Goldman report said, "consumers are increasingly allocating their entertainment wallet toward videogames and eSports, resulting in anemic growth of the publicly traded, more regional focused peers."

Walt Disney is gearing up for a phased reopening of theme parks in Florida.