MSGS: A Hidden Gem in the Era of Soaring Sports Franchise Valuations

The Los Angeles Lakers franchise's historic $10 billion sale to Mark Walter in June 2025 underscores a seismic shift in the sports industry: elite teams are no longer just entertainment assets but high-value investments. For investors, this record-breaking transaction isn't just a headline—it's a roadmap. Among the beneficiaries of this trend is Madison Square Garden Sports Corp. (MSGS), whose portfolio of marquee franchises, including the New York Knicks and New York Rangers, remains undervalued relative to its growth potential. Let's unpack why now is the time to position for this shift.

The Lakers Sale: A New Benchmark for Sports Valuations

The Lakers' $10 billion price tag shatters previous records, reflecting investor confidence in the global appeal of top-tier franchises. Walter's Guggenheim Partners, which also owns the Dodgers, has a proven track record of monetizing star power through premium media deals, sponsorships, and dynamic fan engagement. This model isn't unique to Los Angeles—it's a blueprint applicable to any franchise with the right assets.

For MSGS, home to the Knicks and Rangers, the Lakers' valuation serves as a yardstick. While MSGS's market cap hovers around $4.6 billion, its dual flagship teams boast iconic brands, lucrative local TV deals, and untapped sponsorship potential. Analysts project a median price target of $250 for MSGS stock—implying a 20% upside from current levels—yet its current valuation still lags behind peers.

Compare MSGS's stock trajectory with the rise of major franchise sales (e.g., Lakers, Celtics) to highlight undervaluation.

Why MSGS Is Positioned to Win

1. Revenue Growth Drivers in High Gear

MSGS's Q2 2025 revenue surged 9% to $357.8 million, driven by higher ticket sales, suites, and sponsorships. The Knicks and Rangers played three more home games at Madison Square Garden than in 2024, boosting in-arena revenue. This trend could accelerate as MSGS capitalizes on its prime venue and negotiates new media rights deals. The company's local TV partnership with Spectrum, which paid nearly $200 million for the 2024-25 season, already outperforms many peers.

2. Unlocking the Sponsorship Pipeline

The Lakers' sale highlighted the value of global sponsorships—MSGS is following suit. Recent deals with Tres Agaves Tequila (Rangers) and PepsiCo (cross-franchise) signal a shift toward premium partnerships. The Knicks' jersey patch deal with Abu Dhabi's Department of Culture and Tourism, for instance, isn't just revenue; it's a branding coup for a team with international reach.

3. Cost Management Challenges, but Strategic Flexibility

Critics point to MSGS's high P/E ratio (73.2x) and recent margin pressures due to NBA luxury tax payments. However, the Knicks' current roster—anchored by stars like Karl Anthony Towns—prioritizes long-term competitiveness over short-term profits. Meanwhile, MSGS's $1k in cash and $250 million revolving credit facility provide liquidity to navigate renegotiations of its MSG Networks media rights, a key risk.

Risks and Considerations

• Media Rights Uncertainty: MSG Networks' renegotiation of local TV deals could reduce revenue if distribution deals sour.
• Luxury Tax Burden: The Knicks' high payroll may strain margins, though it also enhances fan engagement and merchandise sales.
• Valuation Skepticism: The high P/E ratio demands consistent revenue growth to justify the stock's price.

The Case for Buying Now

Despite these risks, the Lakers' sale sets a precedent: institutional investors are willing to pay premiums for franchises with global brands and scalable revenue streams. MSGS's stock trades at just $206.63—far below analyst targets and well below the implied value of its assets. With a median price target of $250 and a potential 64% upside (per Guggenheim's $314 target), the upside potential outweighs near-term headwinds.

Display the range of analyst targets and consensus "Strong Buy" ratings to emphasize institutional confidence.

Final Analysis: A Buy with an Eye on Catalysts

Investors should consider MSGS as a leveraged play on rising sports valuations. The Knicks and Rangers are underpriced relative to the Lakers' benchmark, and their revenue streams—bolstered by strong sponsorship pipelines and venue utilization—are primed for growth. While short-term costs and media rights renegotiations pose risks, the long-term story is clear: institutional ownership trends, premium branding, and strategic management will drive MSGS's valuation higher.

Actionable Takeaway: Accumulate MSGS stock on dips below $200, with a target price of $250+ over the next 12–18 months. Monitor Q3 earnings for signs of margin stabilization and new sponsorship wins.

In the era of $10 billion franchises, MSGS isn't just a sports company—it's a growth stock in disguise.