Sphere Entertainment (SPHR): Valuation Check After Q3 Earnings Surprise and Bullish Analyst Re-Rating
Sphere Entertainment (SPHR) just pushed to a record high after its third quarter earnings, even though revenue slightly trailed forecasts and earnings per share fell short, thanks to stronger than expected adjusted operating income.
See our latest analysis for Sphere Entertainment.
The latest move caps a powerful run, with the share price delivering a roughly 54% 90 day return and a 1 year total shareholder return of about 128%, signaling strong positive momentum as investors re rate Sphere Entertainment’s growth story.
If Sphere’s surge has you rethinking where growth might show up next, it could be worth exploring fast growing stocks with high insider ownership as a way to spot other potential momentum stories.
Yet with shares now above the average analyst price target and profits still in the red, the key question is whether Sphere remains undervalued on long term potential or if the market has already priced in its future growth.
Most Popular Narrative Narrative: 11.7% Overvalued
With Sphere Entertainment closing at $84.10 against a narrative fair value of $75.30, the story hinges on how aggressively investors price its future cash flows.
The analysts have a consensus price target of $53.9 for Sphere Entertainment based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $75.0, and the most bearish reporting a price target of just $35.0.
Want to see how modest revenue growth, rising margins and a re rated earnings multiple still justify a premium valuation? The real surprise is in the earnings bridge.
Result: Fair Value of $75.30 (OVERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
However, slower Las Vegas visitation and costly international expansion missteps could quickly undermine the upbeat assumptions behind Sphere’s current valuation.
Find out about the key risks to this Sphere Entertainment narrative.
Another View: Cash Flows Point to Upside
While the narrative fair value suggests Sphere Entertainment is 11.7% overvalued, our DCF model tells a different story, putting fair value closer to $90.72, about 7.3% above today’s $84.10 price. If future cash flows are even roughly right, is the recent rally really done?
Look into how the SWS DCF model arrives at its fair value.
Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Sphere Entertainment for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 905 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.
Build Your Own Sphere Entertainment Narrative
If you see the story differently, or prefer to dig into the numbers yourself, you can build a custom narrative in minutes: Do it your way.
A great starting point for your Sphere Entertainment research is our analysis highlighting 1 key reward and 1 important warning sign that could impact your investment decision.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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