Sphere Entertainment Stock Drops as Analysts Issue Short-Selling Warning

By Michael Davidson

December 5, 2024 at 11:24 PM

Sphere Entertainment (NYSE: SPHR) stock declined Thursday following a bearish recommendation from Hedgeye analyst Andrew Freedman, who projected up to 30% downside potential.

Las Vegas Sphere at night

Las Vegas Sphere at night

Key concerns highlighted by Freedman include:

  • Persistent high operating costs
  • Challenges in achieving profitability through 2025
  • Need for significant growth in Sphere Experience segment
  • Questions about reducing show volumes as a viable strategy

Current challenges facing Sphere:

  • 10% stock decline over the past month
  • 29.5% short interest
  • $125.1 million Q3 operating loss
  • Four consecutive months of declining Nevada gaming revenue

Despite these headwinds, shorting SPHR carries risks:

  • Potential announcements of new high-profile residencies
  • Development of new entertainment options
  • Plans for Sphere-specific version of "The Wizard of Oz"

The company recently addressed concerns about its Madison Square Garden Network debt through an SEC filing on October 11, dealing with nearly $830 million in liabilities that had been weighing on the stock.

Success factors for Sphere's future viability include:

  • Securing top-tier acts and programming
  • Landing marquee one-off events
  • Managing high operating costs
  • Maximizing revenue from single-screen venue

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