Globe的高生产成本、可扩展性挑战引发销售评级

High production costs and scalability challenges with its Las Vegas venue led Benchmark to downgrade Sphere Entertainment (NYSE:SPHR) to Sell from Hold, driving shares 3.5% lower in Tuesday’s premarket trading.

After a celebrated launch last year with a sold-out performance by U2, The Sphere has been plagued by the need to consistently produce high-quality, engaging content to ensure the venue’s “economic viability,” with the added risk that not all events will resonate with audiences.

“With only one screen to recoup these significant investments, the financial risk is substantial,” said Benchmark analyst Mike Hickey.

The pressure is amplified by a weakening consumer environment that could negatively impact non-gaming entertainment in Las Vegas, while a global economic downturn and the high capital required may delay approval for new Sphere locations. The scalability issue is exacerbated by the challenge of getting communities to approve the construction of a massive, glowing, and sound-emitting dome in their communities.

“Given that the original Sphere took five years and $2.3B to construct, rapid expansion seems impractical,” Hickey says, adding that smaller venues are “unlikely to offer the same level of appeal or monetization opportunities.”

Financially, Sphere’s (SPHR) financial future is closely intertwined with MSG Networks, specifically, the latter’s upcoming $850M debt maturing in October. If MSG Networks is unable to refinance the debt or receive cash equity from Sphere Entertainment (SPHR), a default and potential bankruptcy could follow, Hickey warns.

Along with a downgrade, Benchmark assigned a $40 target price to Sphere (SPHR) implying a 14% downside from Friday’s close. Benchmark assigns an exceptionally generous multiple of 18x on FY26 adjusted operating income, acknowledging that this is fundamentally an exhibitor business, while MSG Networks is assigned a 2x multiple to the AOI, recognizing that this is a declining business with a substantial debt load.

While Benchmark is now bearish towards Sphere (SPHR), Seeking Alpha authors and Wall Street analysts still view the stock as a Buy/Strong Buy. Seeking Alpha's Quant rating also views Sphere (SPHR) as a Buy. 

More on Sphere Entertainment

• Sphere Entertainment Co. (SPHR) Q4 2024 Earnings Call Transcript
• Sphere Entertainment: Potentials To Be Realized With The Next-Generation Venue
• Sphere Entertainment: Attractive Risk/Reward Profile (Upgrade)
• J.P. Morgan turns bullish on Las Vegas Sphere owner on business model confidence
• Sphere Entertainment revenue doubles but swings to a loss on high operating expenses