Important points
CNBC’s Jim Cramer said investors who want to own a piece of the NBA champion New York Knicks should consider buying Madison Square Garden Sports, arguing that the stock price still doesn’t fully reflect the value of the two sports franchises. “At the end of the day, a company that owns both the Knicks and the Rangers is trading as if it only owns the Knicks,” the “Mad Money” host said Thursday. The comments came after the Knicks celebrated their victory with a parade through Lower Manhattan. MSG Sports’ stock price soared 22.5% from early April to June 11, and the stock hit an all-time high before the Knicks’ victory on Saturday. The stock has fallen 6% over the past five trading sessions as investors booked profits. While Kramer acknowledged that the win likely boosted ticket revenue and the team’s overall value, he said the win itself was not the main reason to own the stock. “One of the simple reasons I buy MSG is because the company’s market capitalization is currently worth less than the sum of its parts.” MSG Sports owns the Knicks, the NHL’s New York Rangers, and two small franchises in the Developmental League. Kramer pointed out that the Knicks alone were valued at about $10.1 billion, according to CNBC’s latest valuation, and the Rangers were valued at about $3.8 billion last year. Those two franchises are worth nearly $14 billion combined, according to CNBC calculations, but MSG Sports’ current enterprise value is less than $10 billion. Enterprise value includes the value of a company’s equity and debt. “Ultimately, I think the sum-of-the-parts valuation is too good to ignore,” he said. “You’re essentially getting the Rangers for free.” The discount could start to end if the company follows through with its plan to spin off the Rangers into a separate business. Earlier this year, MSG Sports announced it was considering a potential spinoff and later filed paperwork related to the deal. “MSG Sports does appear to be heading toward dissolution, which would separate the Knicks from the Rangers and hopefully help investors unlock all of this hidden value,” Cramer said, noting that MSG Sports management successfully separated its entertainment facilities business in 2020. The company, known as Madison Square Garden Entertainment, later spun off its own immersive Sphere venue in Las Vegas. “Both of these stocks have been big winners in recent years,” he said of MSG Entertainment and Sphere Entertainment. Cramer cautioned that MSG Sports stock remains a unique investment. He said Chairman and CEO James Dolan controls most of the voting power through privately held Class B shares, and the company’s earnings remain modest relative to its valuation. Instead, he noted, investors are betting heavily that the underlying value of the franchise will continue to rise. Still, even after the stock’s recent decline, the setup remains attractive, Cramer said. “I have to say, I like MSG Sports here,” he said. “I’m sure that’s going to send this thing higher.” Subscribe to CNBC Investing Club now to follow Jim Cramer’s every move in the markets. Questions about Cramer’s disclaimer? Call Cramer: 1-800-743-CNBC Want a deeper look into Cramer’s world? Punch him! Mad Money Twitter – Jim Cramer Twitter – Facebook – Instagram Have questions, comments, or suggestions about the Mad Money website? madcap@cnbc.com
