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Bear of the Day: Sphere Entertainment (SPHR)

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Sphere Entertainment (SPHR - Free Report) ) currently lands a Zacks Rank #5 (Strong Sell) as the company has moved futher away from profitability at the moment.

The road ahead may be bumpy upon Sphere's spinoff from Madison Square Garden Entertainment (MSGE - Free Report) ) on April 20. Sphere’s first independent venue is currently under construction in Las Vegas and will weigh on its bottom line with the company planning to open a second venue in London as well.

Furthermore, Sphere’s two regional television networks, MSG Network and MSG Sportsnet will naturally face increasing competition from a plethora of streaming services.

Declining Earnings Estimates

Alluding to the challenges ahead and the near-term impact of potentially opening a second venue in London is the decline in fiscal 2024 earnings estimates. Fiscal 2024 EPS estimates have largely declined from projections of $2.54 per share a month ago to forecast of an adjusted loss of -$1.77 a share. 

While earnings estimates for the current year have gone up, an adjusted loss of -$5.43 a share is still expected.

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Spinoff Performance

Trading at $23 a share, the declining earnings estimates point to more volatility and downside risk ahead for Sphere stock. To that point, shares of SPHR dropped -20% in May and are now down -60% since its spinoff from Madison Square Garden.

Zacks Investment Research
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Bottom Line

Although Sphere has a vision of being a next-generation entertainment company its growth potential from live performances is still a few years away. For now, investors may want to stay on the sidelines as declining earnings estimates for FY24 have dimmed Sphere’s outlook.

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