The entertainment industry has been under pressure due to macroeconomic uncertainties, as it resulted in a fall in consumer expenditure on entertainment and a decrease in overall revenue for the sector.

Therefore, it could be wise to wait for a better entry point in Six Flags Entertainment Corporation (SIX) for reasons discussed throughout this article. However, I think it could be wise to avoid fuboTV Inc. (FUBO), considering its weak fundamentals.

Inflation has compelled Americans to cut back on discretionary spending. Recession fears may further slow entertainment demand, harming the industry’s growth. According to Statista, there is probability of 60.8% that the United States will fall into an economic recession by August 2024.

In addition, recurrent federal rate increases are projected to keep the entertainment sector under pressure. Debt-laden businesses may struggle to recover in the face of a broader economic crisis.

This shift in customer behavior has reduced revenue for entertainment companies, including those operating in movie theaters, concert venues, and amusement parks.

Let us look deeper into the fundamentals of the featured stocks.

Stock to Hold:

Six Flags Entertainment Corporation (SIX)

SIX owns and operates regional theme and waterparks under the Six Flags name. Its parks offer various thrill rides, water attractions, themed areas, concerts and shows, restaurants, game venues, and retail outlets.

SIX’s forward EV/Sales multiple of 3.49 is 208.1% higher than the industry average of 1.13, while its forward EV/EBI multiple of 12.69% is marginally lower than the industry average of 13.10%.

SIX’s trailing-12-month CAPEX / Sales of 9.17% is 185.2% higher than the industry average of 3.22%, while its trailing-12-month asset turnover ratio of 0.51x is 49.7% lower than the industry average of 1x.

SIX’s total revenues for the second quarter ended July 3, 2023, increased 2% year-over-year to $443.71 million. Its adjusted EBITDA increased 5% year-over-year to $161 million.

However, its net income and EPS declined 54.7% and 52.8% year-over-year to $20.55 million and $0.25, respectively.

Street expects SIX’s revenue to increase 5.7% year-over-year to $1.44 billion for the year ending December 2023. Its EPS is expected to decline by 12.9% year-over-year to $1.39 for the same period. Shares of SIX have gained 27.9% over the past year to close the last trading session at $23.70. However, it has lost 10.2% over the past three months.

SIX’s POWR Ratings reflect this mixed outlook. The stock has an overall rating of C, equating to a Neutral in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

SIX also has a C for Growth and Value. It is ranked #7 out of 15 stocks in the Entertainment – Sports & Theme Parks industry. Click here for the additional POWR Ratings for Momentum, Stability, Quality, and Sentiment for SIX.

Stock to Sell:

fuboTV Inc. (FUBO)

FUBO operates a live TV streaming platform for live sports, news, and entertainment content in the United States and internationally.

FUBO’s trailing-12-month CAPEX/Sales of 0.04% is 99.1% lower than the industry average of 4.02%, while its trailing-12-month gross profit margin of 1.96% is 96% lower than the industry average of 49.37%.

FUBO’s total operating expenses for the second quarter ended March 31, 2023, increased 16.5% year-over-year to $365.25 million. Its net loss and loss per share came in at $49.94 million and $0.17.

Its total current liabilities came in at $397.08 million for the period that ended June 30, 2023, compared to $436.90 million for the period that ended December 31, 2022.

FUBO’s EPS is expected to come in at $0.91 for the year ending December 2023. Over the past year, the stock has lost 44% to close the last trading session at $2.37.

FUBO’s has an overall D rating, equating to a Sell in our POWR Ratings system.

It also has an F grade for Stability and a D grade for Quality. It is ranked #12 in the same industry. Beyond what is stated above, we’ve also rated FUBO for Value, Momentum, Sentiment, and Growth. Get all FUBO ratings here.

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SIX shares were trading at $23.54 per share on Tuesday afternoon, down $0.16 (-0.68%). Year-to-date, SIX has gained 1.25%, versus a 12.89% rise in the benchmark S&P 500 index during the same period.

About the Author: Rashmi Kumari

Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions. More...

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