Six Flags' Next ride: $1 a share free-fall

Six Flags, Inc. (NYSE:SIX) shares are down 25% in the past 5 days and 65% in the last 6 months.  The Masters believe things are going to get worse before they get better and we expect shares to get even cheaper.  Next stop -- $1 a share.

The Wanna-be Disney theme park just reported disappointing Q3 results and after the 'ride-related accident' in late June at the Company's park in Louisville, Kentucky it was clear shares were going to take a dive. Total revenue for the quarter decreased 2% to $465.2 million from $474.2 million in the prior-year quarter. Attendance decreased 0.3 million, or 3%, to 12.0 million from 12.3 million in the prior year. The attendance decrease stems from a difficult July during which attendance dropped 9% compared to the prior year.  That 'accident' was more than just a mishap, it almost cost Six Flags its reputation as a 'fun place.'

A teenage girl had lost both her feet below her ankles on a Superman Tower of Power last summer. The ride lifts passengers 177 feet straight up, then drops 154 feet, reaching a speed of 54 miles per hour according to the park's Web site. It opened in 1995 and was known then as "the Hellevator," reports the Louisville Courier-Journal. 

Six Flags liabilities compared with the stockholder equity is a 'Hellevator', and they are way too dependant on banks to cover their debt and expenses. Besides the constant losses during the last few years, 2007 is shaping up to be yet another bad year for SIX. The profits of Q3 07 cannot offset the losses of  Q1 through Q2 07, their profit fell 46% for crying out loud. Add to it that Q4 is a slow period for their business and the hope of a turnaround story is becoming a pipe dream.

 Read what Todd Sullivan had to say about Six Flags conference call today:
"I'm proud of the advances we continue to make at Six Flags despite a temporary setback within the third quarter due to inclement July weather and extensive negative publicity stemming from the accident at our Kentucky park," said Mark Shapiro, Six Flags President and CEO. "With revenue per guest and consumer satisfaction scores at all-time highs and a powerful park-wide capital expansion plan on deck, we are well positioned to deliver on the promise of this company's turnaround in 2008." Right, as long as it does not rain?

Shapiro then contradicted himself to a point in the conference call when he said "Secondly, with regard to attendance, yes, the East Coast which is where we usually have the most risks because we have so many parks really on the East Coast, we are great in East Coast. We had great weather and the parks did well with it." Now, if the weather was great there, why did Georgia and Texas matter so much?

Here is the thing. You can't blame the weather because it will always rain. The overall weather picture was not that bad this summer and as bad a they claim July was, June and August were just a good and the simple fact is they just did not "get it done" when the weather was good. We have not had a hurricane in two years now and Six Flags still cannot turn a profit. What they did not tell you was that the weather in September for almost the entire nation was the best in several years.

So, if from June to October you only have 1 bad month for 1/3 of your locations and it causes the whole house of cards to fall, things just are not working. What happens when we finally get an active hurricane season? It will happen sooner or later and they normally hit the east coast where Six Flags has it "greatest risk". If they cannot turn a profit in near perfect conditions almost all summer and into fall for the vast majority of its parks, what happens when these conditions turn imperfect. Answer? More, larger losses.

Disney (DIS) just reported a 5% guest increase at its Domestic parks over 2006.

They did triumph the fact that they got more from each customer. How? Per capita guest spending increased $0.04 during the quarter to $37.13 as guests spent 3% more in-park, primarily on food and beverages, parking, and games. Yea... we know. I detailed this robbery in October. 

It's getting ugly for Six Flags and if you think the day traders are going to come to the rescue, you better keep your shoes on.  Next stop on this Hellevator is $1 per share.

Article by Frank Lara Jr.

Contributor at TheStockMasters.com

Disclaimer: The Author does not hold any positions or shares in the securities mentioned in this publication.

Please visit WallStNewsletters.com and checkout our financial newsletters including the Full Monte: