Sphere stock falls after Benchmark downgrade

By James Rogers

Las Vegas entertainment Venue Sphere opened in a blaze of publicity when U2 kicked off a successful residency last year

Shares of Sphere Entertainment Co. are down 3.5% in premarket trade Tuesday after the entertainment and media company received a downgrade from Benchmark.

Sphere Entertainment (SPHR) is the owner of the Sphere entertainment venue in Las Vegas, which opened in a blaze of publicity last year when U2 kicked off a successful residency.

"We are downgrading to Sell with a $40 price target, driven by concerns over the Sphere's scalability, high production costs, and a potentially underwhelming profitability outlook," wrote Benchmark analyst Mike Hickey, in a note released Tuesday. "A weakening consumer environment may negatively impact their Las Vegas non-gaming entertainment business, while MSG Networks faces significant debt maturity challenges."

Sphere Entertainment's portfolio includes operator of regional sports and entertainment networks MSG Networks.

Related: Sphere's stock climbs after upgrade from J.P. Morgan

U2's Sphere residence ended in March. Phish played four shows there in April, and Dead & Company completed an extended 30-show residency in early August.

The venue hosted its first corporate event with Hewlett Packard Enterprise Co. (HPE) as well as the NHL Draft. On Sept. 14, Sphere will host UFC 306, its first live sports event. The Eagles are slated to begin a 20-show residency this month. V-U2, an immersive concert film of U2's Sphere run, opens on Sept. 5.

Sphere reported better-than-expected results last month. J.P. Morgan subsequently upgraded Sphere to overweight from neutral and raised its price target to $57 from $37.

Related: It's time for Sphere shares to 'take a breather' says Seaport, downgrading the entertainment venue's stock

Of eight analysts surveyed by FactSet, three have a buy rating, four have a hold rating, and one has a sell rating for Sphere.

Sphere shares are up 37.2% in 2024, outpacing the S&P 500's gain of 18.4%.

-James Rogers

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09-03-24 0717ET

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