Guggenheim Steps To The Sidelines On MSG Networks

Guggenheim's bullish case for MSG Networks Inc MSGN dates back to late 2016, but can no longer be justified as key catalysts for 2019 are already reflected in the stock.

The Analyst

Guggenheim Securities' Michael Morris downgraded MSG Networks from Buy to Neutral with a price target lowered from $30 to $26.

The Thesis

Despite the downgrade, MSG Networks remains well positioned within sports media given its exclusive rights to New York based teams, Morris said in the note. The company has two key catalysts in 2019, including: marketplace regional sports networks (RSN) transactions that offer a real-time perspective on market value for its assets and distribution renewal agreements could take place at more favorable deals.

These catalysts are reflected in the stock's price, however, and the research firm's revised $26 price target is based on 8.5 times calendar year 2019 FCF/share of around $3. The downward revision in price target reflects the company's above average debt level and a more concentrated content offering which adds higher operating risk compared to its peers

MSG Networks' key advantages, including a 20-year long broadcast contract with MSG, a highly visibility free cash flow, a plan to lower its debt load and the potential to be acquired partially offsets the multiple risks.

Price Action

Shares of MSG Networks were trading lower by 1 percent at $24.43 Monday afternoon.

Related Links:

Morgan Stanley Shifts Thesis On Madison Square Garden

How Will MSG Networks Fare In The New TV Environment?