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

By James Rogers

U2's successful residency at the Sphere venue in Las Vegas ended last month

Sphere Entertainment Co. was downgraded from buy to neutral by Seaport Research Partners Monday, pointing to a "potentially softer" next couple of quarters for the Las Vegas entertainment venue.

Sphere (SPHR) shares have risen 33.3% this year, outpacing the S&P 500 index's SPX gain of 9.2%. In a note released Monday Seaport said that Sphere shares have surpassed the analyst firm's $45 price target, aided by sentiment following market purchases by CEO Jim Dolan.

"We think it is time SPHR shares take a breather, as we are entering a potentially softer period over the next couple of quarters than have just been experienced," wrote Seaport analyst David Joyce.

Sphere stock, which is trading around $45.3 is down 3.3% Monday.

Related: Dead & Company is coming to the Sphere this spring

The 360-foot-tall concert and entertainment venue at the Venetian Resort is the world's largest spherical structure, according to the Venetian's website, and had grabbed plenty of attention since its opening last year.

U2 kicked off a successful residency at Sphere on Sept. 29, 2023, which ended March 2. Phish will play four shows at Sphere between April 18 and April 21 and Dead & Company starts a 24-show residency at Sphere on May 16 which runs July 13. Sphere is also offering tickets to The Sphere Experience, which includes Darren Aronofsky's 50-minute immersive film "Postcard from Earth."

"We acknowledge that there is plenty of long-term growth opportunity from layering on a franchise model internationally (but that could take 3-4+ years to start monetizing), and from more-fully scheduling the Las Vegas Sphere (both with the Sphere Experience/future proprietary films, musical residencies, and corporate events)," wrote Seaport's Joyce, in Monday's note.

Related: Sphere, buoyed by U2's successful residency, spells opportunity, say analysts

Seaport will become more constructive on Sphere once there is more clarity on greater sustainable capacity utilization, according to Joyce. "Also, while we think there is discounted value in the future Sphere franchise/revenue-sharing/licensing models, that hypothetical component is far on the horizon," he wrote.

Of seven analysts surveyed by FactSet, one has a buy rating and six have a hold rating for Sphere.

-James Rogers

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04-08-24 1035ET

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