Buy MSG stock because the winning New York Knicks are growing in value, Citigroup says

Citigroup Global Markets reiterated a Buy rating on Madison Square Garden Sports (MSGS) with a $285 price target, citing Forbes' recent valuation of the New York Knicks at $9.75 billion, a 30% year-over-year increase. Analyst Steven Sheeckutz highlighted that MSGS trades at a significant ~58% discount to this valuation, above its historical average, which is expected to attract incremental investors. The bank also anticipates potential increases in NHL franchise valuations, further supporting the stock, despite its recent underperformance against the broader market year-to-date.

Analysis

Citigroup Global Markets has reiterated a "Buy" rating on Madison Square Garden Sports (MSGS) with a $285 price target, projecting a 25% upside. This bullish stance is primarily driven by Forbes' recent valuation of the New York Knicks at $9.75 billion, a substantial 30% year-over-year increase. Analyst Steven Sheeckutz highlights that MSGS currently trades at a significant ~58% discount to this valuation, exceeding the historical average discount of 44% and nearing the maximum of 62%.

The analyst anticipates further upside from potential increases in NHL franchise valuations, specifically for the New York Rangers, citing the new collective bargaining agreement reducing work stoppage risk and a 2.1x step-up in Canadian media rights. Historically, MSGS shares have responded positively to third-party valuation boosts, with similar events leading to approximately a 12% stock increase within 30 trading days.

Despite a 19% gain over the past six months, MSGS has significantly underperformed the broader market year-to-date, rising only 1% compared to the S&P 500's 15%+ gain. While Wall Street is somewhat split with five "buy" ratings against four "hold" ratings, Citigroup's conviction suggests a strong belief in the underlying asset value and future catalysts.

Key Decisions for Investors

• Investors should consider the significant ~58% valuation discount to the New York Knicks' Forbes valuation as a potential entry point for MSGS.
• Monitor the upcoming NHL franchise valuations, expected in December, for additional catalysts given the favorable new CBA and Canadian media rights deal.
• Assess the company's ability to translate strong underlying asset growth into sustained stock performance, especially considering its year-to-date underperformance against the S&P 500.