Shares of Madison Square Garden Sports (MSGS) are poised for significant gains, particularly if the New York Knicks' journey in the NBA Finals against the San Antonio Spurs extends to a thrilling Game 6, according to Guggenheim. This marks the Knicks' first appearance in the NBA Finals since 1999, generating considerable buzz and potential for increased revenue.
The highly anticipated series opener is scheduled for Wednesday at 8:30 p.m. ET at the Frost Bank Center in San Antonio, Texas. Ahead of the championship clash, Guggenheim reiterated its 'buy' rating on Madison Square Garden Sports and significantly raised its price target to $470 from $422. The firm highlighted the financial impact of the Knicks' deep playoff run, noting, "We are updating our model to include 9 home Knicks play-off games (the guaranteed minimum — if the Knicks reach Game 6 of the NBA Finals at The Garden we would potentially add another $15mm+ in revenue)."
Beyond the excitement of the NBA Finals, Guggenheim identified several other catalysts that could unlock substantial value for Madison Square Garden Sports. These include an anticipated spin-off that would strategically separate the Knicks and the New York Rangers into two distinct public entities, potentially streamlining their operations and market valuations.
Furthermore, the prospect of NBA expansion into new markets such as Las Vegas and Seattle, and even Europe, presents another significant financial opportunity. Guggenheim estimates that such expansion could bring in an additional $450 million to $700 million for the Knicks franchise alone. Based on these factors, Guggenheim projects Madison Square Garden Sports' shares could trade between $540 and over $570 per share, representing a premium of approximately 48% above its current trading price.
This optimistic outlook is supported by third-party valuations placing the Rangers between $3.65 billion and $4 billion, and the Knicks between $9.75 billion and $10.1 billion. The company's recent fiscal third-quarter results also paint a positive picture, with Madison Square Garden Sports Corp. reporting revenue of $432.2 million, surpassing FactSet's consensus estimate of $429.7 million.
James L. Dolan, executive chairman and CEO of Madison Square Garden Sports, emphasized the strong performance, stating, "Our results this quarter again reflect growth in per-game revenues across all key categories, which is driven by strong demand for our teams. We are also now exploring a potential separation of our Knicks and Rangers businesses into distinct public companies, which we believe would further create long-term value for shareholders."
