On Thursday, Guggenheim adjusted its financial outlook for Sphere Entertainment shares (NYSE:SPHR), decreasing the price target to $43 from the previous $48 while still recommending a Buy rating for the stock. The revision arrives amidst a more cautious forecast for the company's Sphere segment, particularly concerning The Sphere Experience.
The updated model predicts that Sphere segment revenue will reach $158 million with an Adjusted Operating Income (AOI) of negative $10 million. This contrasts with earlier estimates of $164 million in revenue and an AOI of negative $3 million.
The Sphere Experience is now projected to bring in $80 million in revenue across 207 shows during the quarter, which averages to approximately $390,000 per show, a figure that aligns with the previous quarter's performance. The previous quarter witnessed 257 shows, indicating a decrease in the current quarter.
The reduced number of shows, which is 20% fewer than the previous quarter, is expected to counterbalance any potential decline in revenue per show for Postcard. For context, the third fiscal quarter had 39% more shows than the second fiscal quarter, yet experienced a 22% drop in revenue per show.
Looking forward, Guggenheim continues to anticipate that Sphere Entertainment's financial results will improve over the fiscal years 2025 and 2026. This optimism is based on expectations of increased scale in shows and residencies, better utilization of venues across various types of shows, and growth in advertising, sponsorship, and suite revenue streams.
The revised price target of $43 reflects the new estimates and outlook provided by Guggenheim for Sphere Entertainment's upcoming financial performance.
In other recent news, Sphere Entertainment Co. has reported robust revenue for the fiscal third quarter of 2024, with total earnings reaching approximately $321 million and an adjusted operating income of $61.5 million.
The Sphere venue in Las Vegas, which hosted nearly 1 million guests across more than 270 events, played a significant role in the company's success. Another crucial contribution came from MSG Networks (NYSE:MSGN), a segment of Sphere Entertainment, which reported revenues of $151 million and adjusted operating income of $48.6 million.
In addition to these financial updates, Sphere Entertainment has recently acquired Berlin-based 3D audio technology firm HOLOPLOT GmbH. This acquisition builds on the existing partnership between the two companies, which began in 2018 and led to the creation of the Sphere Immersive Sound system. HOLOPLOT will continue to operate out of Berlin as a wholly owned subsidiary of Sphere Entertainment.
The partnership with HOLOPLOT has significantly impacted the live sound experience, according to Roman Sick, CEO and Co-Founder of HOLOPLOT. The acquisition is expected to expedite HOLOPLOT's mission of expanding its technology's applications and markets. These are among the recent developments in Sphere Entertainment's ongoing efforts to lead innovation in immersive experiences.
InvestingPro Insights
Amidst the revised forecasts by Guggenheim for Sphere Entertainment (NYSE:SPHR), the real-time data from InvestingPro paints a detailed picture of the company's financial standing. With a market capitalization of $1.22 billion and a striking revenue growth of 598.56% over the last twelve months as of Q3 2024, SPHR is showing signs of expansion in its market presence.
Still, the company is grappling with challenges as analysts do not expect profitability this year, which aligns with Guggenheim's cautious stance. This is further substantiated by a high P/E ratio of 34.51, suggesting that investors may be expecting future earnings growth to justify the current valuation.
InvestingPro Tips highlight that while the company has been profitable over the last twelve months, it is quickly burning through cash, and its short-term obligations exceed its liquid assets. Moreover, the valuation implies a poor free cash flow yield, and the price has fallen by nearly 30% over the last three months. Despite these concerns, Sphere Entertainment does not pay a dividend, potentially focusing its resources on navigating through its current financial situation.
For readers looking to delve deeper into Sphere Entertainment's financials and future prospects, InvestingPro offers additional insights. Utilize the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and discover the full range of InvestingPro Tips available for SPHR at https://www.investing.com/pro/SPHR.
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