Sphere Entertainment (SPHR Quick QuoteSPHR - 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 Quick QuoteMSGE - 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.

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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.