Investors should buy Madison Square Garden Sports stock on the back of predictions that the value of the New York Knicks basketball team will increase, according to Citigroup Global Markets. The bank on Thursday reiterated its buy rating on the owners of the Knicks and the National Hockey League’s New York Rangers. The $285 price target implies an upside of about 25% from Friday’s closing price. The bullish opinion on MSG Sports, which is owned by the Dolan family, was published on the same day that Forbes reported that the Knicks are valued at an estimated $9.75 billion, up 30% from last year and third highest in the NBA behind the Golden State Warriors and Los Angeles Lakers. “At a prevailing level, the Forbes value suggests MSGS is trading at a ~58% discount, which is above the average discount of 44% and just below the maximum discount of 62%,” analyst Steven Sikatz said in a 16-page report. “With this discount, we believe there is room for investors to accrete and maintain a buy rating on MSGS.” The Knicks are off to a 2-0 start to the season and are one of the favorites to win the Eastern Conference. The analyst also believes there is room for a similar increase in Forbes’ NHL franchise valuations, which are typically released in December. “Since Forbes’ last update, we suspect NHL franchise values will benefit from the NHL’s new[collective bargaining agreement]agreement (which reduces the risk of work stoppages) and new Canadian media rights agreements, which have seen a healthy step up in average annual value of 2.1x,” he said. In particular, Madison Square Garden Sports’ stock price has shown positive movement over the past three years due to an increase in third-party valuation. In this case, Forbes’ updated valuation of the Knicks could result in a stock price increase of about 12% within 30 business days of Forbes’ latest valuation, Seekatz said. MSGS YTD Mountain MSGS, Year-to-date Although the stock is up about 19% over the past six months, the stock has significantly underperformed the broader market year-to-date, rising only about 1% compared to the S&P 500’s rise of more than 15%. Wall Street is quite divided on MSG Sports, with five out of nine analysts rating it a “buy” and four rating it “hold,” but the consensus 12-month price target of $252 suggests about 10% upside.
