Stocks of Sphere Corporation Alarmed by Hefty Discounts, Yet Clouded by Imminent Risks
Post Date: May 10, 2025, 07:10h.
Last Updated: May 10, 2025, 07:10h.
Todd Shriber @etfgodfather | Read More | Financial | Gaming Business | Mergers and Acquisitions
Sphere Entertainment's Stock Price Doesn't Reflect True Value* "Barron's" highlights undervaluation* "Dolan discount" adding to the issue* Wall Street sees cheap shares
Despite a recent spike (nearly 16% this week), Sphere Entertainment's (NYSE: SPHR) shares are losing ground (down 19.37% year-to-date). This massive decline has piqued market observers who believe the stock's low valuation needs a second look.
The latest issue of Barron's sheds light on Sphere, arguing it may be too cheap. John Rogers Jr., Ariel Investments' founder and CIO, stated Sphere's stock price is a 50% discount compared to his net asset value estimate, according to Barron's. The conglomerate's market cap of $1.17 billion is about half of the $2.3 billion they spent constructing the Las Vegas Sphere.
Moreover, Sphere's recent restructuring of MSG Networks–an RSN whose financial problems have long been a burden for the company–is easing the burden. Sphere now manages a $350 million debt, down from over $800 million highs.
When Sphere was detached from Madison Square Garden Entertainment Corp. (NYSE: MSGE) in 2023, the Dolan family imposed MSG Networks onto Sphere. The move allowed for some cash flow during the Sphere Las Vegas' early days. Now that MSG Networks is in a more robust financial position, analysts anticipate it will soon detach from Sphere, either through merger, sale, or spin-off.
The "Dolan Discount": A Thorny Issue
The "Dolan discount" - applicable to Sphere and the family's other publicly-traded entities, MSG Networks and Madison Square Garden Sports (NYSE: MSGS) - persists as another obstacle for Sphere stock. This bias suggests the Dolans prioritize control over profits, causing stocks to decline in value2.
For instance, MSG Sports, a holding company for the New York Knicks and New York Rangers, is valued at $4.61 billion. However, the Knicks alone have an estimated worth of $7.5 billion, and the Rangers are valued at $3.5 billion.
While the "Dolan discount" is tangible, Wall Street remains optimistic on Sphere stock. Six out of ten analysts covering it give it "buy" or "strong buy" recommendations, and the consensus price target is $47.80, representing a surplus of 47% from its May 9 closing price1.
Further Evidence of Undervaluation
Data from Wolfe Research analyst Peter Supino, featured in Barron's, bolsters the argument that Sphere is seriously undervalued3. Supino estimates the Las Vegas Sphere is worth $1 billion in market value to the operator and the upcoming Sphere in Abu Dhabi is worth an additional $750 million. Summing these values ($1.75 billion) significantly outweighs Sphere's market value and neglects $200 million from the RSN, plus potential future contributions from other Spheres3.
Barron's also speculates on the possibility of Sphere being sold to another entertainment giant, but this seems unlikely, especially considering James Dolan received $18 million in equity compensation last year, suggesting he believes the stock is too inexpensive to disregard.
- Todd Shriber, known as @etfgodfather, suggests Sphere Entertainment's (NYSE: SPHR) shares are undervalued, with the Dolan discount adding to the issue.
- Despite a recent spike, SPHR's shares are down 19.37% year-to-date, leading market observers to question the stock's low valuation.
- John Rogers Jr., Ariel Investments' founder and CIO, believes SPHR's stock price is a 50% discount compared to his net asset value estimate.
- Sphere's restructuring of MSG Networks has eased the company's financial burden, as Sphere now manages a $350 million debt, down from over $800 million highs.
- Analysts anticipate that MSG Networks will soon detach from Sphere, either through merger, sale, or spin-off.
- Wall Street remains optimistic on SPHR stock, with six out of ten analysts giving it "buy" or "strong buy" recommendations, and the consensus price target at $47.80, representing a surplus of 47% from its May 9 closing price.
