Sphere Stock Deeply Discounted, But Laden with Potential
Posted on: May 10, 2025, 07:10h.
Last updated on: May 10, 2025, 07:10h.
- Sphere Entertainment market cap doesn’t reflect opportunity set
- “Dolan discount” seen as partial culprit
- Wall Street believes shares are cheap
Even with a nearly 16% gain this week, shares of Sphere Entertainment (NYSE: SPHR) are off 19.37% year-to-date — a decline some market observers believe highlights the stock’s discounted valuation.
The stock was featured prominently in the latest issue of Barron’s with the publication laying out a case for Sphere being arguably too cheap. John Rogers Jr., founder and chief investment officer at Ariel Investments, noted Sphere trades at a 50% discount to his estimate of net asset value, according to Barron’s. The stock’s market capitalization of $1.17 billion is about half the $2.3 billion the company spent to build the Sphere Las Vegas.
There’s also the benefit of a recent debut restructuring of MSG Networks — the regional sports network (RSN) whose outstanding liabilities had long been an overhang on Sphere sock. Sphere now carries debt of $350 million, down from highs north of $800 million.
When Sphere was spun off from Madison Square Garden Entertainment Corp. (NYSE: MSGE) in 2023, the Dolan family, which has majority control of both companies, forced MSG Networks into Sphere as a way of providing some cash flow to the Las Vegas venue in its early innings. Now that the sports network is in better financial shape, some analysts believe its days as part of Sphere are numbered as the parent company could merge or sell it or spin it off.
Dolan Discount Weighing on Sphere Stock
Another headwind for shares of Sphere — one that’s harder to address than parting ways with MSG Networks – is the “Dolan discount.” It’s applicable to Sphere and the family’s other public companies — Madison Square Garden Entertainment and Madison Square Garden Sports (NYSE: MSGS).
That reflects concerns that the Dolans will prioritize control over what’s best for all shareholders. MSG Sports, for instance, is valued at half the estimated value of the two teams because the Dolans are viewed as unlikely to sell,” reports Barron’s.
The Dolan discount isn’t a financial markets fable. It’s real. Madison Square Garden Sports, which is the holding company for the New York Knicks and the New York Rangers. The entity sports a market capitalization of $4.61 billion, but the Knicks alone are worth an estimated $7.5 billion. The NHL’s Rangers are said to be valued at $3.5 billion.
While the Dolan discount is real, Wall Street is broadly bullish on Sphere stock. Six of the 10 analysts covering it rate it a “buy” or “strong buy” and the consensus price target is $47.80, implying upside of 47% from the May 9 close.
More Reasons Sphere Stock Is Undervalued
Data courtesy of Wolfe Research analyst Peter Supino cited by Barron’s further cements the notion that Sphere is getting into ridiculously cheap territory. The analyst estimates the Las Vegas Sphere is worth $1 billion in market value to the operator and the upcoming Sphere in Abu Dhabi is worth another $750 million.
That’s $1.75 billion combined and well in excess of Sphere’s market value. It also doesn’t include $200 million from the RSN and any contributions from new Sphere’s that will be added in the future.
Barron’s mentioned the possibility of Sphere potentially being sold to another live entertainment company, but that could be a far-fetched possibility particularly when considering CEO James Dolan took $18 million in equity compensation last year, perhaps signaling he’s among those that view the stock as too cheap to ignore.
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