On Wednesday, Goldman Sachs (NYSE:GS) made an optimistic move on Madison Square (NYSE:SQ) Garden Entertainment Corp (NYSE:MSGE) stock, upgrading it from Neutral to Buy and increasing the price target to $45 from $41. This change reflects the firm's confidence in the company's potential to outperform market expectations, particularly by the fiscal year 2025.
The firm cited several factors for the positive outlook on MSG Entertainment. First, the expectation is that the company will surpass consensus forecasts, driven by strong event bookings at its venues, high demand for the Christmas Spectacular, a resurgence in sponsorship and premium hospitality, and anticipated margin expansion greater than previously thought. These elements combine to present a compelling case for the stock's upgrade.
Additionally, Goldman Sachs highlighted the durability of MSG Entertainment's business model. The company boasts premier assets in a leading global entertainment market, which are seen as resistant to the broader industry's supply and demand fluctuations. The analyst firm believes that this positions MSG Entertainment as a standout in its sector.
Looking ahead, the firm anticipates that MSG Entertainment will focus on capital returns, particularly through share repurchases. This is expected to occur as the company's net leverage stabilizes around 3.0x by the end of the fiscal year 2024 and as it rebuilds excess liquidity during the winter months, which are typically high in cash generation.
Lastly, Goldman Sachs pointed to the company's attractive valuation. With MSG Entertainment's shares trading at 12.2 times STM GSe Adjusted EBITDA and 15.5 times STM fully-taxed free cash flow, the firm believes the market is undervaluing the company's long-term growth prospects and near-term revenue and margin execution opportunities. The analyst's comments underscore the belief that now is an opportune moment for investors to engage with a unique, pure-play venues business that exhibits a robust financial model.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.