Six Flags Entertainment Corp (NYSE:SIX) shares plunged 8.53% on Monday amid growing concerns about the rising delta covid-19 variant cases. The stock is now down more than 28% since peaking on 12th March.
The adverse economic effects of covid-19 continue to ravage various industries, with theme parks and entertainment centers suffering significant declines in revenue and earnings. Therefore, the thought that another wave of the delta variant could force countries to implement more lockdowns and limit social interactions could halt the recovery of theme park businesses.
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As such, Six Flags investors are wary of potential stock price declines before the market fully recovers.
Six Flags Entertainment stock valuation and outlook
Although Six Flags shares fell 8.53% on Monday, there is still significant downward pressure due to the rising cases of the delta variant of covid-19. Concerns about the new variant affect multiple industries, including the airline industry, restaurants, and entertainment stocks.
Therefore, it is clear how serious the situation is becoming, leaving little room for recovery. As such, Six Flags shares could fall further in the coming months due to a lack of market catalysts.
From a valuation perspective, SIX trades at a forward price-earnings ratio of 18.45. Analysts expect the company’s earnings to fall by 336.90% this year before rising 517% next year. Therefore, there could be more downward movements before the SIX stock price makes a significant recovery.
Technical overview: SIX stock price forecast for Q3 2021
Technically, Six flags stock appears to have plunged to oversold conditions in the 14-day RSI. The SIX share price has also dropped outside the descending channel formation following Monday’s pullback. However, it is yet to hit the support level at about $32.85, leaving more room for downward movement.
Investors can target extended pullbacks at $32.85 or lower at $28.07. The resistance levels are $40.61 and $45.03.
Bottom line: the case for shorting SIX stock now
Although SIX shares have plunged significantly in recent trading sessions, the stock is yet to reach the support level at $32.85. In addition, Six Flags also lacks significant catalysts to trigger a rebound, while the delta covid variant continues to exert pressure on theme park stocks. Therefore, it may be best to wait for the stock price to fall further before attempting to buy a rebound.
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