Is Sphere Entertainment (SPHR) Pricing Reflect Lofty Expectations After Las Vegas Sphere Buzz?

• If you are wondering whether Sphere Entertainment’s share price matches its underlying worth, you are not alone. This article is designed to help you frame that question clearly.
• The stock last closed at US$115.70, with returns of 24.1% over 7 days, 17.8% over 30 days, 22.7% year to date and 140.0% over 1 year. These figures naturally raise questions about how much future upside or downside is already reflected in the price.
• Recent coverage has focused on Sphere Entertainment’s high profile Sphere venue in Las Vegas and broader interest in live entertainment experiences. This has kept the company on many investors’ radars. This backdrop helps explain why some market participants are rethinking the balance between potential growth and the risks tied to a single flagship asset.
• Our valuation model gives Sphere Entertainment a valuation score of 2 out of 6, which reflects the number of checks where the stock screens as undervalued. Next, we will walk through the different approaches behind that score and touch on a more holistic way to think about value at the end of the article.

Sphere Entertainment scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Sphere Entertainment Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model estimates what a company could be worth today by projecting its future cash flows and then discounting those back to a present value.

For Sphere Entertainment, the model used is a 2 Stage Free Cash Flow to Equity approach based on cash flow projections in US$. The latest twelve month free cash flow is a loss of $272.47 million, so the valuation leans heavily on future expectations rather than current cash generation.

Analyst and extrapolated estimates suggest free cash flow moving into positive territory over the coming years, reaching $469.00 million by 2030. Intermediate projections include $151.80 million in 2026 and $408.00 million in 2029, with later years extrapolated by Simply Wall St rather than directly forecast by analysts.

When all projected cash flows are discounted back using this 2 stage model, the estimated intrinsic value comes out at about $201.05 per share. Compared to the recent share price of $115.70, this implies the stock screens as about 42.5% undervalued on this DCF view.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Sphere Entertainment is undervalued by 42.5%. Track this in your watchlist or portfolio, or discover 53 more high quality undervalued stocks.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Sphere Entertainment.

Approach 2: Sphere Entertainment Price vs Earnings (P/E)

For profitable companies, the P/E ratio is a useful way to see how much investors are paying for each dollar of earnings, because it ties the share price directly to the underlying profit figure.

A higher or lower P/E can often be linked to what the market expects for future earnings growth and how risky those earnings appear. Higher expected growth or lower perceived risk can support a higher P/E, while lower growth or higher risk tends to line up with a lower, more cautious multiple.

Sphere Entertainment currently trades on a P/E of 122.94x, compared with an Entertainment industry average of 32.74x and a peer group average of 43.93x. Simply Wall St also calculates a proprietary “Fair Ratio” of 5.82x. This is the P/E it would expect given factors such as the company’s earnings profile, industry, profit margins, market cap and specific risks.

This Fair Ratio aims to be more tailored than a simple peer or industry comparison, because it attempts to adjust for company specific growth, risk and profitability rather than assuming one size fits all.

When set against the Fair Ratio of 5.82x, the current P/E of 122.94x suggests Sphere Entertainment screens as expensive on this earnings based view.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your Sphere Entertainment Narrative

Earlier we mentioned that there is an even better way to understand valuation. On Simply Wall St’s Community page you can use Narratives to connect your own story about Sphere Entertainment to a set of revenue, earnings and margin assumptions, turn that into a Fair Value, compare it to the current price to help you decide whether to buy or sell, and see how different views range from a more cautious US$35 Fair Value to a more optimistic US$75 Fair Value, all updating automatically as new news, bookings data and earnings information come in.

Do you think there’s more to the story for Sphere Entertainment? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data
and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your
financial situation. We aim to bring you long-term focused analysis driven by fundamental data.
Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
Simply Wall St has no position in any stocks mentioned.

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