Is The Hottest Destination In Las Vegas Also A Good Investment? Jim Cramer And Analysts Weigh In

The Sphere has become a must-visit destination in Las Vegas. At 366 feet tall, the striking orb is the world's largest spherical building and can accommodate 20,000 guests. Bands including U2, Phish, and Dead & Company have performed concerts at the venue, using immersive audio and video capabilities to delight crowds.

Does a great experience mean it's a great investment? The Sphere, located near The Venetian Resort, was under construction from 2018 to 2023. Shortly after its debut, It was spun off from Madison Square Entertainment Corp. MGSE into Sphere Entertainment SPHR. The company includes not just the Sphere but also two sports networks, MSG Networks and MSG Sportsnet. 

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Most of the investment thesis around Sphere Entertainment centers on The Sphere and how it can be monetized. In the company's fourth fiscal quarter, The Sphere alone generated $151 million in revenue. The company reported $273.4 million in revenue for the quarter and $1.04 billion for the year, with a $201 million net loss.

The Eagles will be the next band to do a residency, performing concerts until the end of January 2025. The Sphere will get its first test as a sports destination when UFC 306 is held there later this month. 

In addition to its value as a concert venue, The Sphere is also the home of Darren Aronofsky's "Postcards From Earth," a movie and exhibition. Tickets start around $100, and film showings contributed nearly half of The Sphere's revenue in the fourth quarter. This week, The Sphere is also adding showings of "V-U2," a movie that captures the experience of the U2 concerts at The Sphere. It may also host showings of "The Wizard Of Oz" in the future. 

The Wait For A Sequel

The future value of Sphere Entertainment will hinge somewhat on whether the popularity of the building can be replicated. After the city rejected plans for a London Sphere, the company looked at South Korea and Abu Dhabi as possible expansion targets. On CNBC's "Mad Money,"  Jim Cramer mentioned that he wasn't initially unsure if The Sphere would be the latest in a line of Las Vegas novelties that would get old. He's been impressed by the results so far but said, "I just can't recommend the stock until we get confirmation that they can actually build more of these things in commercially viable locations."

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 The difficulty in creating The Sphere is one reason Benchmark analyst Mike Hickey recently downgraded the stock to "Sell." Not all analysts agree with Hickey's take. The stock is rated a consensus "Neutral" and had two upgrades in August. Hickey noted the exorbitant costs of creating new buildings and the challenge of finding another city with the "consistent tourist traffic needed to support long-running content or concert residencies."

While the giant orb gets all the attention, investors will also want to look at the sports streaming side of the business. MSG Networks provides coverage of five NBA and NHL professional sports teams. It brought in $122 million in revenue during the fourth quarter, down 5%. Sphere recently announced a partnership with Gotham Advanced Media and Entertainment to launch the Gotham Sports App this fall, delivering content from the New York Knicks, New York Rangers, New Jersey Devils, New York Islanders, Buffalo Sabres, Brooklyn Nets, and New York Yankees. 

While The Sphere represents an achievement in entertainment, the company faces risks, including a potential downturn in consumer spending. The novelty could also wear off as more people visit the venue. One of the major hurdles the company will face is how to continue making more money from its core investment and deliver growth over time for investors. 

A Better Bet For Growth Right Now? 

While the Sphere may not be a sure thing, there are other ways for investors to make money. The current high-interest-rate environment has created an incredible opportunity for income-seeking investors to earn massive yields, but not through dividend stocks… Certain private market real estate investments are giving retail investors the opportunity to capitalize on these high-yield opportunities and Benzinga has identified some of the most attractive options for you to consider. 

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