O'Keefe Stevens Advisory, Inc. on Sphere Entertainment Co.
Thesis
The adviser continues to discuss Sphere as a unique venue asset with the possibility of a longer positive payoff than conventional forecasts capture. Despite a 22.3% quarterly drop after an earlier surge, the venue’s Q2 revenue grew 29%. The slowdown of The Wizard of Oz after its early run and weaker Las Vegas tourism show why the path of monetization can be uneven. The investment logic is the underlying asset’s long-term potential rather than extrapolating one quarter’s share price.
“great assets often have longer right tails than one underwrites.”
Key risks
- Revenue from The Wizard of Oz slowed following the initial run.
- Las Vegas visitation fell 4.3% year over year in August.
- The stock is volatile, declining 22.3% in Q3 after a 47.5% gain in Q2.