The Madison Square Garden Company (MSG - Free Report) is poised to benefit from strategic acquisitions and expansion initiative. Moreover, operational efficiency of the company added to the upside.
Notably, shares of the company have gained 9.9% in the past year compared with the industry’s 6.8% rise.
However, intense competition in the Entertainment business and higher expenses in the operational front are headwinds.
Let’s discuss the factors that substantiate the company’s Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
To strengthen its footprint and explore additional opportunities, Madison Square has been focusing on asset building through partnerships and acquisitions. The company’s majority stake in TAO — entertainment, dining and nightlife company — has enhanced its portfolio from 19 to 26 venues. Being its primary strategy, venue expansion enables the company’s marketing partners to showcase brands in powerful and innovative ways by leveraging the venue's unique platform.
In 2014, the company acquired 50% interest in Tribeca Enterprises, owner of the acclaimed Tribeca Film Festival. In 2016, Madison Square Garden acquired an approximately 12% common equity stake in Townsquare Media, a leading media, entertainment and digital marketing solutions company.
Madison Square is also optimistic about the new venues in Las Vegas and London, which is expected to open in 2020 and 2021. The company expects to tread on growth trajectory, driven by its first-class operations, innovation and ability to deliver top-class experience to guests.
Additionally, maintenance of iconic venues in top live entertainment markets and legendary sports franchises is boosting the company’s overall brand presence.
Another vital growth driver for the company is its operational expertise. Madison Square Garden continues to benefit from ongoing efforts to reinstate growth through multi-night and multi-marketing agents. In September 2019, the company announced expanded multi-year agreement with the Hospital for Special Surgery, which provides long-term partner with significant brand exposure across the Knicks, Westchester Knicks and the NBA 2K18 Knicks Gaming. Thus, the company intends to add value to core operational team by utilizing its proficiency in marketing partnerships and media rights.
Numerous sports and entertainment options prevalent in the market are threats to Madison Square’s ticket sale prices and profits. Notably, revenues from the Entertainment segment declined 2% in first-quarter fiscal 2020, primarily due to event-related revenues at the company's venues.
Moreover, the company has been bearing high expenses due to operational and partnership initiatives, which hurt overall profits. During first-quarter fiscal 2020, Madison Square’s SG&A expenses increased 23.7% on a year-over-year basis. Also, direct operating expenses surged 6.9% from the year-ago quarter’s level.
Some better-ranked stocks in the Zacks Consumer Discretionary sector include Vista Outdoor Inc (VSTO - Free Report) , Carnival Corporation (CCL - Free Report) and SeaWorld Entertainment, Inc (SEAS - Free Report) . Vista Outdoor currently sports a Zacks Rank #1, while Carnival Corporation and SeaWorld Entertainment carry a Zacks Rank #2 (Buy).
Vista Outdoor’s 2020 earnings is expected to rise 14.3%.
Carnival Corporation earnings surpassed estimates in all of the trailing four quarters, the average being 11.3%.
SeaWorld Entertainment has three-five year expected earnings per share growth rate of 7%.
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