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Wolfe Research upgraded Madison Square Garden Entertainment (MSGE, Financials) to "Outperform" from "Peer Perform," citing undervaluation and strong growth potential in live entertainment. The firm set a price target of $46.
Strong demand for events at Madison Square Garden and the annual Radio City Christmas Spectacular, which brought in $171 million in income last year and almost 25% of MSGE's overall sales underpin its revenue growth. Unlike other MSG-hosted events, which run on a leasing basis, MSGE totally owns and supports the Christmas Spectacular, therefore increasing profits.
With a 10% free cash flow yield for fiscal 2026, the stock now trades at nine times enterprise value to earnings before interest, taxes, depreciation, and amortization. Wolfe Research believes these valuation criteria are appealing and projects a mid-to-high single-digit increase in adjusted operating income over the next three years.
The business notes little downside owing to MSGE's pricing power, low financial leverage, and consistent event bookings, although blames MSGE's undervaluation to macroeconomic issues and inconsistent capital allocation. Operating with a six-to nine-month booking cycle, MSGE expects summer to provide more visibility on its 2026 event schedule, therefore boosting investor mood.
Wolfe applies a 30% discount to an intrinsic value estimate of $66 and values MSGE at 15 times estimated 2026 adjusted operating income. Driven by growing event demand, good cash flow, and possible debt reduction, the company expects double-digit returns.
Wolfe Research sees MSGE as a long-term winner in the live entertainment sector despite larger economic dangers; it gains from steady demand, social media interaction, and streaming trends.
This article first appeared on GuruFocus.