Sphere Entertainment Co. (NYSE: SPHR)

Sector: Communication Services Industry: Entertainment CIK: 0001795250
Market Cap 3.36 Bn
P/B 1.56
P/E -21.39
P/S 2.97
ROIC (Qtr) -9.16
Div Yield % 0.00
Rev 1y % (Qtr) 15.18
Total Debt (Qtr) 1.00 Bn
Debt/Equity (Qtr) 0.46

About

Sphere Entertainment Co., also known by its stock symbol SPHR, is a prominent player in the live entertainment and media industry. The company operates through two primary segments: Sphere and MSG Networks. Sphere is a next-generation entertainment medium that combines cutting-edge technologies with multi-sensory storytelling to provide immersive experiences at an unmatched scale. MSG Networks, on the other hand, is an industry leader in sports production, content development, and distribution, operating two award-winning regional sports and entertainment...

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Price action

Investment thesis

Bull case

  • Healthy cash reserves of 398.25M provide 3.79x coverage of short-term debt 104.97M, demonstrating strong liquidity position and minimal refinancing risk.
  • Tangible assets of 3.77B provide exceptional 23.69x coverage of deferred revenue 159.15M, showing strong service capability backing.
  • Strong tangible asset base of 3.77B provides 3.77x coverage of total debt 1B, indicating robust asset backing and low credit risk.
  • Cash reserves of 398.25M provide ample 10.43x coverage of acquisition spending 38.17M, enabling strategic growth opportunities.
  • Tangible assets of 3.77B provide robust 6.92x coverage of other current liabilities 544.71M, indicating strong asset backing.

Bear case

  • Operating cash flow of 69.86M barely covers its investment activities of (29.19M), with a coverage ratio of -2.39, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • Operating cash flow of 69.86M provides insufficient coverage of deferred revenue obligations of 159.15M, which is 0.44x, raising concerns about future service delivery capabilities.
  • The company's operating cash flow of 69.86M shows concerning coverage of stock compensation expenses of 67.51M, with a 1.03 ratio indicating potential earnings quality issues.
  • Operating earnings of (41.68M) show weak coverage of depreciation charges of 366.83M, with a -0.11 ratio indicating high capital intensity and potential reinvestment needs.
  • Free cash flow of 2.30M provides weak coverage of capital expenditures of 67.56M, with a 0.03 ratio suggesting additional external financing needs for growth initiatives.

Peer comparison

Companies in the Entertainment
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 NFLX Netflix Inc 398.09 Bn 38.16 9.18 14.46 Bn
2 DIS Walt Disney Co 204.13 Bn 16.46 2.16 42.03 Bn
3 WBD Warner Bros. Discovery, Inc. 70.69 Bn 145.75 1.87 33.52 Bn
4 FWONA Liberty Media Corp 53.12 Bn -399.43 13.15 7.04 Bn
5 LYV Live Nation Entertainment, Inc. 33.40 Bn 103.67 1.36 9.39 Bn
6 FOXA Fox Corp 33.26 Bn 16.34 2.02 6.60 Bn
7 PSKY Paramount Skydance Corp 18.94 Bn -1,353.00 0.66 14.73 Bn
8 TKO TKO Group Holdings, Inc. 17.56 Bn 76.76 4.05 4.04 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 0.97 1.53
EV to Cash from Ops. EV/CFO 57.47 25.10
EV to Debt EV to Debt 4.01 5.03
EV to EBIT EV/EBIT -96.32 165.24
EV to EBITDA EV/EBITDA -116.05 -156.71
EV to Free Cash Flow [EV/FCF] EV/FCF 1,743.98 72.07
EV to Market Cap EV to Market Cap 1.19 2.12
EV to Revenue EV/Rev 3.54 6.42
Price to Book Value [P/B] P/B 1.56 2.40
Price to Earnings [P/E] P/E -21.39 -114.33
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Dividend Coverage Ratio 0.00 1.03
Dividend Payout Ratio % Div Payout % (Qtr) 0.00 -17.28
Dividend per Basic Share Div per Share (Qtr) 0.00 0.14
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 0.00 7.73
Interest Coverage Int. cover (Qtr) -0.45 -38.17
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) 42.88 -33.75
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) -28.01 248.04
Dividend Growth (1y) % Dividend Growth (1y) % 0.00 0.52
EBIAT Growth (1y) % EBIAT 1y % (Qtr) 82.72 -100.15
EBITDA Growth (1y) % EBITDA 1y % (Qtr) 7.25 -28.24
EBIT Growth (1y) % EBIT 1y % (Qtr) 87.88 -85.91
EBT Growth (1y) % EBT 1y % (Qtr) 70.36 24.10
EPS Growth (1y) % EPS 1y % (Qtr) 58.19 18.31
FCF Growth (1y) % FCF 1y % (Qtr) 125.04 118.70
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 1.21 30.85
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.27 0.60
Cash Payout Ratio Cash Payout (Qtr) 0.00 0.04
Cash Ratio Cash Ratio (Qtr) 0.57 0.45
Current Ratio Curr Ratio (Qtr) 0.96 1.09
Debt to Equity Ratio Debt/Equity (Qtr) 0.46 1.01
Interest Cover Ratio Int Coverage (Qtr) -0.45 -38.17
Times Interest Earned Times Interest Earned (Qtr) -0.45 -38.17
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 28.70 -65.26
EBIT Margin % EBIT Margin % (Qtr) -3.68 -79.53
EBT Margin % EBT Margin % (Qtr) -11.78 -82.47
Gross Margin % Gross Margin % (Qtr) 47.60 35.56
Net Profit Margin % Net Margin % (Qtr) -13.90 -83.18