J.P. Morgan analysts upgraded their rating on Sphere Entertainment (NYSE:SPHR) to “overweight” from “neutral” after gaining confidence in the company’s operating model despite initial skepticism.
The research firm said since opening its doors to the public, the company’s financials indicated that it will succeed in signing up international franchise partners and believes the potential upside from it is not reflected in the stock price. JPM believes Sphere could substantially cut SG&A spend and limit the downside to the stock.
“Three quarters in, the Las Vegas Sphere has established itself as a mainstay in the destination tourism market with travelers and artists alike. Despite some early concern, the operating model has proven out, and we expect can improve further as more original content is added and use cases are found for the venue,” the research firm said in its note dated August 16.
For the first quarter, JPM now expects SPHR’s overall revenue of $249M vs. prior revenue of $250M. SA consensus estimate for Q1 revenue is $245.4M.
SPHR has a PT of $57, implying an upside of 23%. Shares of the company are +5% by Friday afternoon. Stock is +42% so far this year as of Thursday’s close, while the benchmark S&P index rose 16%.
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