Shares of Madison Square Garden Entertainment ( NYSE:MSGE ) rose in premarket trading Thursday as Morgan Stanley upgraded the media and entertainment company ahead of a possible bid for the live entertainment business.
Analyst Benjamin Swinburne upgraded Madison Square Garden Entertainment ( MSGE ) to underweight, noting that since the Aug. 18 announcement, there has been a potential spinoff in its New York offices and a new company that owns its stake in MSG stock. Nightclub company TAO and its chains fell 33%, compared with the S&P 500's 7% decline. Swinburne said:
"As a result of rotation and underperformance, we see a more balanced risk/reward tradeoff and an upgrade to [equal weights]," the analyst wrote in a note to clients.
In an updated sum of the parts analysis, Swinburne found that both companies are worth $75 for bulls and $25 for bears due to leverage and low EBITDA potential.
However, Swinburne noted that next year will likely have a better understanding of revenues from the $2.2 billion MSG Sphere project, as well as a better understanding of the revenue strength of New York venues, including Madison Square Garden. And while regional sports networks like MSG are under pressure, Swinburne noted, it's likely already tied to stock prices.
Jefferies downgraded shares of Madison Square Garden Entertainment ( MSGE ) last month, citing the "disguised" value of real estate.
Analysts are generally cautious about Madison Square Garden Entertainment ( MSGE ). It has a Hold rating by Search for Alpha authors, while Wall Street analysts have given a Hold rating. Additionally, Alpha's research on quantum systems, which consistently beats the market, ranks MSGE as a sell .
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