Rising Global Sports Media Rights Will Unlock Knicks And Rangers Appeal

Key Takeaways

• Exceptional team performance, events, and premium offerings are expected to drive outsized, high-margin revenue growth across all major business segments.
  
• Expansion in media rights, global partnerships, and digital innovation positions the company for superior long-term profitability and brand scalability versus peers.
  
• Declining and unpredictable media revenues, escalating costs, and heavy reliance on team success threaten long-term profitability and cash flow amid industry-wide secular headwinds.

Catalysts

Operates as a professional sports company in the United States.

• Analyst consensus expects sustainable uplift in ticket, merchandise, and sponsorship revenues following notable team performance and star acquisitions, but with upcoming landmark events like the Rangers' 100th anniversary and back-to-back record playoff gates, there is the potential for unprecedented demand surges across all fan-facing business lines, driving outsized top-line revenue growth well above current forecasts.
  
• While analysts broadly agree that new sponsorships and corporate partnerships will drive incremental revenue, the pipeline of multiyear, global partnerships and expansion of premium hospitality offerings post-renovation has not only the potential to accelerate sponsorship revenue but also to meaningfully expand operating margins due to higher-yield, longer-duration contracts.
  
• The new NBA national media rights deal will begin boosting revenues in fiscal 2026, but ongoing global growth in sports media rights and the expected shift toward direct-to-consumer streaming could unlock a step-change in annual rights revenue, franchise valuation multiples, and future digital monetization, substantially raising both revenue and asset NAV.
  
• The enduring global brand equity of the Knicks and Rangers positions MSG Sports to capitalize on explosive international demand for merchandise, live events, and branded digital content, allowing for scalable, high-margin revenue expansion that is structurally superior to most domestic competitors.
  
• The increasing legalization of sports betting and the company's advanced fan engagement and data-driven marketing strategies will likely unlock entirely new digital sponsorship categories, improved in-arena monetization per fan, and high-margin recurring revenue streams, with a material positive impact on EBITDA growth and overall profitability.

Madison Square Garden Sports Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Madison Square Garden Sports compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Madison Square Garden Sports's revenue will grow by 2.0% annually over the next 3 years.
• Even the bullish analysts are not forecasting that Madison Square Garden Sports will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Madison Square Garden Sports's profit margin will increase from -2.2% to the average US Entertainment industry of 9.2% in 3 years.
• If Madison Square Garden Sports's profit margin were to converge on the industry average, you could expect earnings to reach $101.8 million (and earnings per share of $4.24) by about August 2028, up from $-22.5 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 98.0x on those 2028 earnings, up from -206.0x today. This future PE is greater than the current PE for the US Entertainment industry at 31.0x.
• Analysts expect the number of shares outstanding to grow by 0.27% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.81%, as per the Simply Wall St company report.

Madison Square Garden Sports Future Earnings Per Share Growth

Risks

• The recent amendments to the Knicks' and Rangers' local media rights agreements with MSG Networks resulted in 28 and 18 percent reductions in annual rights fees, along with removal of annual escalators and shorter contracts, which means the company faces structurally lower and less predictable local media revenues into 2029, directly weighing on consolidated revenue and margin growth going forward.
  
• The call highlighted rising direct operating costs, mainly higher team personnel compensation and luxury tax, outpacing revenue growth, which is a long-term industry trend that can erode operating income and compress net margins if not adequately offset by sustainable revenue increases.
  
• The company's dependence on flagship team performance was clear, as this year's growth was driven by the Knicks' extended playoff run-failure of either major franchise to succeed or reach playoffs could cause declines in ticket sales, sponsorship renewals, and merchandise, leading to significant volatility in revenue and earnings.
  
• Secular trends such as cord-cutting and the ongoing erosion of linear TV viewership may further weaken the value of both existing and future national and local broadcast rights, presenting a risk that overall media revenue projections could disappoint over the long term, affecting consolidated revenue materially.
  
• Persistent increases in player salaries and higher cap figures, together with mention of regular high luxury tax and revenue-sharing expenses, suggest cost inflation may structurally outpace top-line growth if not met by new revenue streams, posing a risk to both free cash flow and overall profitability.

Valuation

• The assumed bullish price target for Madison Square Garden Sports is $314.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Madison Square Garden Sports's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $314.0, and the most bearish reporting a price target of just $220.0.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $1.1 billion, earnings will come to $101.8 million, and it would be trading on a PE ratio of 98.0x, assuming you use a discount rate of 9.8%.
  
• Given the current share price of $192.65, the bullish analyst price target of $314.0 is 38.6% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.