Deep Price Cut on Sphere Shares, Yet Laced with Possible Risks
Posted on: May 10, 2025, 7:10am.
Last updated on: May 10, 2025, 7:10am.
By: Todd Shriber @etfgodfather
Want to dive deeper into Sphere Entertainment's massive potential? Here's the lowdown.* "Dolan discount" pins down Sphere stock as a steal** Wall Street can't get enough:**
Sphere Entertainment (NYSE: SPHR) is on a roll, gaining nearly 16% in a week. Yet, year-to-date, it's sunk 19.37%, according to some market watchers, hinting at a major discount.
The company made headlines in the latest issue of Barron's, with the publication championing SPHR as a potential value play. John Rogers Jr., Ariel Investments' founder and CIO, pointed out that SPHR trades at a 50% discount compared to his estimate of net asset value, according to Barron's. SPHR currently boasts a market cap of $1.17 billion, approximately half of the $2.3 billion it invested to construct the Sphere Las Vegas.
Additionally, a recent overhaul of MSG Networks - the regional sports network that's long cast a shadow over SPHR - has shed some light on the stock's prospects. Sphere is now anchored with debt worth $350 million, compared to highs over $800 million.
Sphere Spun Off – Sayonara MSG Networks?
When SPHR split from Madison Square Garden Entertainment Corp. (NYSE: MSGE) in 2023, the Dolan family (who has power over both companies) dropped MSG Networks onto Sphere as a way to finance the Las Vegas venue's early days. With MSG Networks recovering financially, analysts speculate that it could cut ties with SPHR, potentially merging, selling, or spinning off the sports network.
Can't Ignore the "Dolan Discount"
A lingering hurdle for SPHR's stock price is the "Dolan discount" – a label attached to the Dolan family's public companies, including SPHR, MSGE, and MSGS. Investors harbor concerns that the Dolans will prioritize control over the benefit of all shareholders[2]. For example, MSG Sports, which owns the New York Knicks and the New York Rangers, is valued at just half the estimated value of both teams because the Dolans are assumed to shun selling.
Nevertheless, the "Dolan discount" doesn't seem to faze Wall Street, which is predominantly enthusiastic about SPHR's future. Six of ten analysts tag it as a "buy" or "strong buy", and the consensus price target stands at $47.80, implying a 47% increase from May 9's closing price.
More Reasons SPHR Is a Bargain
Wolfe Research analyst Peter Supino shared further evidence that SPHR is ridiculously cheap with Barron's. Supino posits that the Las Vegas Sphere and Sphere in Abu Dhabi are worth $1.75 billion collectively – miles beyond SPHR's market value. This figure doesn't include the sports network or future projects[3].
Thanks to these factors, analysts foresee a potential acquisition of SPHR by another live entertainment company, particularly considering CEO James Dolan's $18 million equity compensation from the previous year[2]. However, this might be a stretch, as the CEO's optimism about the company's future prospects indicates that he wants SPHR to stand on its own.
- Financial rumors continue to swirl around Sphere Entertainment (NYSE: SPHR) as analysts predict a potential acquisition by another live entertainment company.
- Recently, John Rogers Jr., Ariel Investments' founder and CIO, said that SPHR trades at a 50% discount compared to his estimate of net asset value, hinting at a significant financial opportunity.
- The financial health of SPHR has improved significantly since the overhaul of MSG Networks, which was once a major burden on the company.
- Despite concerns about the "Dolan discount" and potential control issues with the Dolan family, Wall Street remains optimistic about SPHR's future, with six out of ten analysts recommending a "buy" or "strong buy" on the stock.
