Six Flags uses tiered membership, regional appeal take on Disney's $1 billion Galaxy Edge park

2019/07/14 Innoverview Read

For singer Selena Gomez and the Oakland Raiders' rookie class, summertime means a trip to Six Flags for a heart-pounding ride on one its massive roller-coasters.

But they aren't alone in their love of the iconic amusement park, which claimed a record $1.46 billion in revenue during 2017, a 7.6% jump over the previous year and what the company described as its "eighth-consecutive year of record financial performance."


The stock has taken a hit in recent months and is down 25% from its 12-month high of $72.39 set in September, trading around $54 a share Friday.  Six Flags declined to comment.

But Six Flags is expected to see strong summer sales in 2019 as the company's new loyalty program and international buzz are boost ticket sales, according to WedBush Securities analyst John Hardiman, who recently raised his price target from $51 a share to $62.

That makes Hardiman and other Wall Street analysts bullish on Six Flags, despite new rides and theme parks at Universal and Disney, like the $1 billion Star War's Galaxy Edge theme-park. Six Flags has developed a niche audience because of its regional appeal. Like Hardiman, analysts at KeyBand Capital Markets upgraded the amusement park's shares.

"Six Flags has got Magic Mountain in L.A. and locations in Chicago, New England, Texas," he said. "Where you live determines which amusement park you go to, with few exceptions," Hardiman said.

He said because Six Flags has such geographic diversity, it is well-positioned in the theme park industry. It has 22 locations in the United States compared with Universal and Disney, which each have only two locations in California and Florida.

Six Flags is trying to lure guests into multiple summer visits with its retooled Membership 2.0 program. The 2018 revamp of their program offers different tiers of annual membership that range between $230 for Gold Plus and for $490 Diamond Elite. The packages, which are now on sale at 60% their original price, come with discounts, priority parking and other perks, depending on the status level.

So far, it seems to be working.

The changes helped bump membership enrollment up by 30% in 2018. Analysts say the membership program adds $40 more in revenue per guest a year than for its regular season pass holders. That alone will bring in an additional $26 million in revenue for the 2019 season.

"We think the impact of the membership tiers is transformational for the company," Tyler Batory, an analyst at Janney, wrote in a July 1 research note. "The average membership is 30% higher than a pass ... different tiers also entice customers to buy items they may not have otherwise purchased."

Some of the biggest attractions include the highly-popular Six Flags Magic Mountain in Valencia, California and recently opened Wonder Woman Lasso of Truth in Jackson, New Jersey, which is the world's largest pendulum ride at 17 stories tall.

Ebony, a 20-year-old fan of the Tastu, X2, and Goliath rides, said she is looking forward to a Six Flags trip this summer. She posted on Twitter, "a six flags trip would be real nice."

"It's summer, best time to go in my opinion, and the adrenaline rush while waiting in line to get on the rides is amazing," she said.

Founded in Texas in 1961, Six Flags was named after the six nations that once claimed control over the Lone Star state: Spain, France, Mexico, the Republic of Texas, the Confederate States of America and the United States. The theme park has expanded much beyond its original borders to Canada, Mexico, China, Saudi Arabia and the United Arab Emirates.

The company's currently building four parks in China that are set to open in 2022, generating international media attention.

"Negative news surrounding its international contracts has been a headwind for sentiment the past few quarters," Batory wrote. "We believe the headlines may have bottomed and there is potential upside from additional announced contracts."

The theme park's geographical diversity makes it unique among amusement parks with parks scattered around in less densely-populated cities like Rockford, Illinois, and Concord, California. As a result, the company has usually more effectively hedged against weather trends that may impact one part of the country more substantially in a given quarter, in comparison with Disney or Universal, Hardiman said.

"If a park is open, but experienced unfavorable weather, its estimated attendance is assumed to be half the 'normal' level," Hardiman wrote.

Six Flag fans can now experience the twisting, turning Maxx Force roller coaster, which the company touts as the fastest launch roller coaster in North America. Reaching speeds of 78 miles-per-hour in under 2 seconds, it is expected to draw crowds just in time for summer.

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