The Las Vegas Sphere has captured the hearts of music, movie and sports fans since opening in 2023.
An analyst has upgraded shares of the company behind the iconic Las Vegas venue, citing the early success of its business model.
The Sphere Entertainment Analyst: JPMorgan analyst David Karnovsky upgraded Sphere Entertainment Co SPHR shares on Friday from Neutral to Overweight and raised the price target from $37 to $57.
The Analyst Takeaways: Sphere Entertainment has an attractive risk/reward opportunity for investors, Karnovsky said.
The analyst said “the operating model has proven out,” which comes after the company recently reported fourth-quarter financial results. The company's $273.4 million in revenue beat a Street consensus estimate of $271.3 million, according to data from Benzinga Pro.
"Three quarters in, the Las Vegas Sphere has established itself as a mainstay in the destination tourism market with travelers and artists alike," Karnovsky said.
The analyst said the company can improve the operating model further with additional original content and venue use cases.
"The financials since launch give us further confidence that the company will succeed in signing up international franchise partners, the potential upside from which we do not believe is reflected in the stock price."
The analyst said an international location is "a matter of when, not if."
Karnovsky said Sphere can increase its revenue with new shows and more cinematic originals. The upcoming UFC fight offers an opportunity to showcase the use case as a sports venue, the analyst said.
While shares have risen in 2024, the analyst noted that management’s compensation structure signals confidence in a higher future share price. CEO James Dolan has options to purchase shares starting at $75, with additional options increasing in $25 increments up to $150.
"Such an out-of-the-money package we believe reflects management confidence in the long-term outlook."
SPHR Price Action: Sphere shares finisehd 6.4% higher at $49.22 on Friday versus a 52-week trading week of $27.02 to $51.83. Sphere stock is up 45% year-to-date in 2024.
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