On Wednesday, Sphere Entertainment's (NYSE:SPHR) stock faced a downward revision in its price target by Benchmark. The new price target is set at $36.00, decreased from the previous $40.00, while the company still holds a Sell rating. The adjustment comes in the wake of Sphere's recent financial performance, which has shown concerning trends.
The entertainment company reported a significant decline in revenue, with a 16% drop sequentially in the third quarter. This downturn represents a 24% fall from the revenue reported in its launch quarter. Moreover, Sphere's latest quarter was marked by a substantial operating loss of $26 million, a stark contrast to the $14 million profit achieved during the company's initial period.
The Sphere segment, in particular, recorded a notably larger adjusted operating loss in the quarter, which has contributed to the overall financial strain. The analyst from Benchmark noted the contrast between the company's current market valuation and its financial health, highlighting a disparity that suggests overvaluation.
Sphere Entertainment's stock is currently trading at 50 times its projected 2024 adjusted earnings before interest, taxes, depreciation, and amortization (AEBITDA). The analyst's observation points to a "massive mispricing by the market," given the company's backsliding trajectory and deteriorating profitability. This statement underscores the rationale behind the reduced price target and maintained Sell rating for Sphere Entertainment.
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