Sphere Entertainment's stock got a downgrade over profitability and more factors, including scalability and high production costs.
The year-old Sphere venue quickly became a must-see attraction in Las Vegas, but some analysts don’t believe the eye-grabbing, multi-purpose venue has a viable business model. BenchmarkSphere Entertainment Co. to a “sell” rating on Tuesday with a $40 price target, sending the stock down 4.4% to $44.55.
Benchmark downgraded the stock over concerns about the company’s “scalability, high production costs, and a potentially underwhelming profitability outlook,” wrote Benchmark analystin an investor note. “A weakening consumer environment may negatively impact their Las Vegas non-gaming entertainment business, while MSG Networks faces significant debt maturity challenges.” The MSG Networks division of Sphere Entertainment Co. operates regional sports networks and the MSG+ streaming platform.
The stunning $2.3 billion venue has “the potential to change the entertainment landscape for artists, guests and partners,” CEOsaid during the company’s Aug. 14 earnings call. “Fully realizing that vision will take time, but we are learning every day how to optimize Sphere’s operating model.” Dolan emphasized how the company is learning to increase the venue’s utilization to hold different types of events and multiple events on a single day.
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