Madison Square Garden Entertainment ( NYSE:MSGE ) shares edged up Thursday in premarket trading as Morgan Stanley updated the media and entertainment company ahead of a possible spin-off of its live entertainment business.
Analyst Benjamin Swinburne upgraded his equilibrium rating on Madison Square Garden Entertainment (MSGE) from underweight, noting that its stock in MSG has fluctuated since its New York office was announced on Aug. 18 and a possible spin-off into a new company, nightclub operator TAO . and its networks, shares fell 33% compared to a 7% decline in the S&P 500. And while the details of the spin-off have changed since that initial announcement, a transaction is still likely to unlock shareholder value, Swinburne said.
“Due to the top-line and underperformance, we see a more balanced risk/reward tradeoff and an improvement in [balance],” the analyst wrote in a note to clients.
In an updated sum-of-the-parts analysis, Swinburne found that both companies would be worth $75 in a bull case but $25 in a bear case due to leverage and lower EBITDA potential.
However, Swinburne noted that in the coming year there will be greater insight into the revenue potential of the $2.2 billion MSG Sphere project, as well as a better understanding of the profitability of its New York sites. including Madison Square Garden. . And while regional sports networks, like namesake MSG, continue to come under pressure, Swinburne noted that it’s likely “already leaking through to stock prices.”
Last month, Jefferies downgraded shares of Madison Square Garden Entertainment (MSGE) citing “dirty” real estate values.
Analysts are mostly cautious on Madison Square Garden Entertainment (MSGE). It has a stable rating from the authors of Seeking Alpha, while Wall Street analysts have given it a stable rating. Additionally, Searching Alpha’s Quantum Systems, which has consistently outperformed the market, rates MSGE as a SELL .
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