The NBA's New York Knicks are giving their parent company a layup in the stock market, and some financial analysts say buying shares of the Madison Square Garden Sports Corp. (NYSE:MSGS) could be a slam dunk for investors.
Citigroup (NYSE:C) analyst Steven Sheeckutz started coverage of the sports holding company in September, according to media reports, saying the company was "underestimated." He issued a "Buy" rating and a $285 price target for the stock, which closed at $214.39 on Friday.
"MSG Sports is one of the cheapest stocks relative to the value of its underlying assets," Jonathan Boyar, president of the Boyar Value Group, told Barron's. He said the company's value could be worth over $400 a share, or 86% more than its stock price.
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The Dolan discount
The increased coverage of the MSG Sports stock comes as the Knicks and NHL's New York Rangers, also owned by the company, have become two of the most valuable U.S. sports teams.
The Knicks are valued at $9.75 billion, according to Forbes, making them the third most valuable NBA team behind the Los Angeles Lakers at $10 billion and Golden State Warriors at $11 billion.
The Rangers are valued at $3.5 billion, according to Forbes, and are the second most valuable NHL team behind the Toronto Maple Leafs at $3.8 billion.
Despite the teams' high value, MSG Sports stock is often traded under its value due to the "Dolan Discount," named after company CEO James Dolan, who has repeatedly said he has no plans to sell either team or Madison Square Garden where both clubs play their home games.
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According to Boyar, MSG Sports trades at an enterprise value of $5 billion.
Boyar in June urged Dolan to end the discount by splitting the Knicks and Rangers into independently traded public companies.
"Over the past five years, MSGS shares have returned just 21%, compared to a 141% gain for the S&P 500," Boyar said in a statement issued with an open letter urging Dolan to separate the two teams.. "The market's failure to recognize this disconnect is precisely why action is needed."
Boyar made his plea shortly after the NBA's Boston Celtics and Lakers were sold for $6.1 billion and $10 billion, respectively. He argued a full or partial sale of either team could help unlock shareholder value.
"A split would not only eliminate the holding company discount, but it would also give investors a clean way to own either—or both—franchises," Mark Boyar, founder of The Boyar Value Group, said in the statement accompanying the letter.
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