Given the economic uncertainties amid macroeconomic headwinds and the recent banking sector tumult, sports entertainment stocks with bleak prospects, Manchester United plc (MANU), Madison Square Garden Entertainment Corp. (MSGE), and Genius Sports Limited (GENI), might be best avoided this week for reasons mentioned throughout the article.
The Fed’s incessant rate hikes to tame sky-high inflation and the financial sector chaos have ceased the “easy cash era” and induced a “credit crunch.” Consequently, recessionary concerns have soared, and experts believe economic slowdown to hit soon.
Chief executive of consulting firm Roubini Macro Associates, Nouriel Roubini, anticipates that price stability, maintaining economic growth, and financial stability could not be achieved at the same time, and hence, forewarned an economic and financial crash.
Consequently, the market volatilities are expected to linger for a while. Given the current market scenario, people are cutting back on their discretionary spending, such as entertainment spending. As of February 26, 2023, U.S. arts, entertainment, and recreation spending by all consumers decreased by 3.6% compared to January 2020.
Michael Furtschegger, Global Head of Entertainment at Allianz Global Corporate & Specialty (AGCS), stated, “Our entertainment clients are still feeling the effects of inflation, with increased production and live-event costs, but it’s less of a shock.”
As per a report by S&P Global, sports is a ‘double-edged sword’ for broadcast TV. While sports revenue is holding up, high fixed broadcast rights fees “impair cash flow and margins.” Moreover, while viewers shift to streaming platforms, it is not considered as profitable as live TV.
Given this backdrop, fundamentally weak sport industry stocks MANU, MSGE, and GENI might be avoided this week.
Manchester United plc (MANU)
Headquartered in Manchester, the United Kingdom, MANU owns and operates Manchester United Football Club, a professional football club. The company develops marketing and sponsorship relationships with international and regional companies to leverage its brand. It also markets and sells sports apparel and licensed products, like coffee mugs and bedspreads, as well as distributes them.
In terms of forward EV/Sales, MANU is trading at 5.99x, 209.4% higher than the industry average of 1.94x. Its forward EV/EBITDA multiple of 26.70 is 218.6% higher than the industry average of 8.38.
MANU’s trailing-12-month EBITDA of 14.13% is 21.6% lower than the industry average of 18.02%. Also, its trailing-12-month ROCE, ROTC, and ROTA are negative 66.64%, 6.87%, and 8.32% compared to the 2.96%, 3.54%, and 1.64% industry averages, respectively.
For the fiscal second quarter that ended December 31, 2022, MANU’s revenue from contracts with customers decreased 9.7% year-over-year to £167.37 million ($206.35 million). The company’s operating loss came in at £2.86 million ($3.53 million) for the quarter that ended December 31, 2022, compared to the operating profit of £5.41 million ($6.67 million) for the year-ago quarter that ended December 31, 2021.
MANU’s current liabilities came in at £608.29 million ($749.96 million) as of December 31, 2022, compared to £472.99 million ($583.15 million) as of December 31, 2021.
Analysts expect MANU’s EPS for the fiscal year ending June 2023 to decline 9.6% year-over-year to negative $0.26. Its revenue is expected to come in at $746.49 million during the same period.
Over the past three months, the stock has lost 5.1% to close the last trading session at $22.15. Moreover, it declined by 3% intraday.
MANU’s POWR Ratings reflect its bleak prospects. It has an overall rating of F, equating to a Strong Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has a D grade for Growth and Quality and an F for Value and Stability. It is ranked last within the 14-stock D-rated Entertainment – Sports & Theme Parks industry.
To see the other ratings of MANU for Momentum and Sentiment, click here.
Madison Square Garden Entertainment Corp. (MSGE)
MSGE provides live entertainment services, including venues, marquee entertainment brands, regional sports and entertainment networks, dining and nightlife offerings, and music festivals. It operates through the following segments: Entertainment; MSG Networks; and Tao Group Hospitality.
In terms of forward EV/Sales, MSGE is trading at 2.21x, 14.3% higher than the industry average of 1.94x. Its forward EV/EBITDA multiple of 36.55 is 336.1% higher than the industry average of 8.38.
MSGE’s trailing-12-month EBITDA margin of 5.90% is 67.3% lower than the industry average of 18.02%. Also, its trailing-12-month ROCE, ROTC, and ROTA are negative 4.75%, 0.11%, and 1.62% compared to the 2.96%, 3.54%, and 1.64% industry averages, respectively.
MSGE’s revenues from MSG networks for the fiscal second quarter that ended December 31, 2022, declined marginally year-over-year to $158.90 million. Its adjusted operating income came in at $124.13 million. The company’s total current assets came in at $916.16 million as of December 31, 2022, compared to $1.22 billion as of June 30, 2022.
Cash, cash equivalents, and restricted cash at the end of the six-month period that ended December 31, 2022, came in at $553.74 million compared to $1.28 billion for the six months that ended December 31, 2021.
Analysts expect MSGE’s EPS for the quarter ending June 2023 to come in at negative $1.67. For the same quarter, revenue is expected to decline 4.3% year-over-year to $434.13 million. It failed to surpass the consensus EPS in three of the four trailing quarters.
Over the past month, the stock has lost 2.9% to close the last trading session at $59.07. It has lost 27.8% over the past year.
MSGE’s weak fundamentals are reflected in its POWR Ratings. It has an overall rating of D, equating to Sell in our proprietary rating system.
It has a D grade for Quality. It is ranked #11 same industry.
Click here to see the other ratings of MSGE for Growth, Value, Momentum, Stability, and Sentiment.
Genius Sports Limited (GENI)
GENI manufactures and sells technology-leading products and services to the sports, sports wagering, and sports media industries. It also provides technology infrastructure collection, integration, and distribution of live data of sports leagues; streaming solutions; and end-to-end integrity services to sports leagues.
In terms of forward EV/Sales, GENI is trading at 2.37x, 109.7% higher than the industry average of 1.13x. Its forward EV/EBITDA multiple of 22.34 is 137.8% higher than the industry average of 9.40.
GENI’s trailing-12-month gross profit margin of 0.84% is 97.6% lower than the industry average of 35%. Also, its trailing-12-month ROCE, ROTC, and ROTA are negative 28.31%, 17.37%, and 23.49% compared to the 11.79%, 6.35%, and 4% industry averages, respectively.
For the fiscal fourth quarter that ended December 31, 2022, GENI’s loss from operations stood at $44.82 million. The company’s net loss attributable to common shareholders and net loss per share also increased 139.7% and 125% from the year-ago value to $127.72 million and $0.63, respectively.
As of December 31, 2022, the company’s total current assets stood at $236.52 million compared to $324.68 million as of December 31, 2021.
For the fiscal second quarter ending June 2023, GENI’s EPS is expected to decline 179.3% year-over-year to negative $0.06. Moreover, its revenue for the same quarter is expected to come in at $77.93 million.
The stock gained 1.6% intraday to close the last trading session at $4.98.
GENI’s POWR Ratings are consistent with this bleak outlook. It has an overall rating of D, equating to Sell in our proprietary rating system.
It has an F grade for Quality. Within the same industry, it is ranked #12.
To see the other ratings of GENI for Growth, Value, Momentum, Stability, and Sentiment, click here.
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MANU shares were trading at $21.29 per share on Monday morning, down $0.86 (-3.88%). Year-to-date, MANU has declined -8.74%, versus a 7.31% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
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