Six Flags Stock Picks Up Speed Ahead of Earnings

Six Flags will report earnings before the open on Wednesday, Feb. 24

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The brunt of earnings season might be over, but there are still some stragglers left. Amusement park icon Six Flags Entertainment Corporation (NYSE:SIX) is scheduled to release its fourth quarter and full year financial results before the market opens on Wednesday, Feb. 24. 

The stock has an ugly history of post-earnings moves. In the last eight quarters, SIX has averaged a post-earnings move lower of 8.4%. This includes drops of 12.4% back in October 2019, and a 8.6% fall after the most recent quarterly report. This time around, the options market is pricing in a larger-than-usual post-earnings move of 10.6%, regardless of direction.

On the charts, Six Flags chart has more than quintupled off its March 18 dip below $9, which was an 11-year bottom. On Friday, SIX scored an annual high of $42.80, extending  its year-to-date gain to 22.8%.

From a fundamental point of view though, Six Flags Entertainment has a lot of major issues. For starters, the company’s revenues have decreased by 66% percent over the past year. SIX has also taken more than $348 million in net losses over the past 12 months.

This is made even worse by the fact that Six Flags was reporting unprofitable quarters even before the pandemic. The company’s net profits decreased by nearly $100 million between 2018 and 2019. Additionally, with a massive debt total of $2.86 billion and less than 10% of that value in cash, Six Flags’ long term growth potential seems nearly nonexistent and seemingly already priced in.

For those that want to take a flyer, options are an intriguing route. Even with a volatility event such as earnings approaching, the stock's Schaeffer's Volatility Index (SVI) of 69% sits in the 12th percentile of its 12-month range, meaning option traders are pricing in relatively low volatility expectations at the moment. 

 

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