By Senad Karaahmetovic
Manchester United (NYSE:MANU) is defended at Jefferies after Deutsche Bank analysts downgraded the stock last week following the FQ1 earnings report.
MANU reported an adjusted Ebitda of £23.6 million ($1 = £0.81) and an adjusted net loss of £9.9M on revenue of £143.7M, up 14% year-over-year. The results were better than expected, paving the way for the iconic football club to raise its full-year 2023 forecast for the adjusted Ebitda to a range of £125-140M from the prior £100-110M.
Similarly, MANU also raised the FY revenue outlook to £590-610M, up from £580-600M.
Still, Deutsche Bank analysts cut the rating on Manchester United stock to Hold from Buy with a price target of $24 per share. The analysts expect potential sales discussions to continue through Q1 2023.
“This is a trophy asset, which is likely to be of interest to sovereign wealth funds, but also potentially to Media conglomerates looking to take advantage of rising interest in soccer in the U.S. But there is a risk that the family may have unrealistic value expectations,” they explained in a note.
As a result, Manchester United stock declined nearly 6.9% on Friday. However, Jefferies analysts said MANU delivered a “clean quarter,” and urged investors to increase exposure to a long-term value generator.
“The team is iconic and should continue to perform at a high level over the LT, monetization opportunities should increase, and company margins should remain high. In our view, MANU should be a core holding for PMs looking for companies that have growing underlying asset value (the team) and strong ongoing cash flow. Recent sports team transactions underscore what we view as an appealing opportunity to invest in MANU shares at current levels,” they told clients in a note.
The analysts also raised the price target to $25 per share from $17, reflecting “a slight premium to the ~5x multiple Chelsea received.”
They also said that “fundamentals justify a transaction price well in excess of current levels, in our view.”
Manchester United stock closed at $20.35 on Friday, valuing the football club at $3.32 billion. Some media reports hinted that the Glazers family, which owns Manchester United, will seek at least $6 billion to sell the club.