Why Sphere Entertainment is capturing Wall Street's attention

Jonathan Boyar, director of Boyar Value Group and advisor to the MAPFRE AM US Forgotten Value Fund

In a world where how we are entertained is constantly changing, Sphere Entertainment Co. (SPHR) is pushing the boundaries of what’s possible—and investors are taking notice as the stock has advanced 27% YTD and 54% since it was spun out of Madison Square Garden Entertainment in April of 2023.

The Sphere delivers experiences that go far beyond the boundaries of traditional concerts, movies, and even sports. Its debut venue in Las Vegas, a city saturated with world-class entertainment, is already turning heads—an impressive feat in a place where standing out is no small task.

But beyond the glitz and glamour, is Sphere Entertainment a smart investment? Let’s take a closer look at what’s driving the excitement and why we have made it a position in the Mapfre US Forgotten Value Fund.

A game-changer in live entertainment

The Las Vegas Sphere, a state-of-the-art venue opened in 2023 to rave reviews. The Sphere is not just another concert hall—far from it. With a 580,000-square-foot programmable LED exterior and the world’s largest high-resolution LED screen inside, the venue is designed to immerse audiences in a visual and audio experience unlike anything they’ve ever seen.

Picture yourself at a concert where the walls move, the sound vibrates through your seat, and the visuals seem to pull you into another world. That’s what CEO James Dolan set out to do when he came up with the idea, and early feedback suggests it’s delivering on his vision in a big way.

The venue initially launched with a 5-show run by U2, but due to overwhelming demand, the band ended up performing 40 times. The excitement has only grown, with other major acts like Phish and Dead & Company performing, and this Fall, the Eagles will take the stage.

The Sphere’s uniqueness has drawn significant media attention, further amplifying the buzz. It was prominently featured during this year’s Super Bowl and the inaugural Las Vegas Formula 1 race in November 2024. In addition to concerts, the Sphere has hosted a wide range of events, including corporate gatherings and immersive film experiences like Postcards from Earth, the venue’s proprietary content, which generated over $400K per performance during Fiscal Year 2024.

The investment case: why sphere is more than a flashy venue

So, why should investors consider investing in Sphere and why is it a position in The Mapfre US Forgotten Value Fund:

A Unique Asset in a Prime Location. The Las Vegas Sphere isn’t just a new addition to the entertainment scene—it’s a one-of-a-kind venue in a city that thrives on tourism. Las Vegas attracts over 40 million visitors annually, and Sphere is already becoming a must-see attraction (in fact local hotels have reportedly been charging more for rooms with a view of the Sphere). The venue’s proximity to the Las Vegas Strip means it’s perfectly positioned to capitalize on this influx of tourists, offering an experience that visitors can’t get anywhere else.

Multiple High-Margin Revenue Streams. Sphere Entertainment isn’t just relying on ticket sales to generate revenue. One of its most exciting opportunities comes from its massive LED exosphere, which can display dynamic advertising visible from miles away. Major brands like Adidas, Meta, Coca-Cola, and YouTube have already capitalized on this unique platform, which could eventually deliver 4.7 million daily impressions. The potential for recurring, high-margin revenue from corporate sponsors is significant. Sphere is also exploring naming rights, and hosting high-profile sporting events, including a UFC event that occurred on September 14th.

Proprietary Content and Events. The Sphere’s success isn’t just about concerts or corporate events. The company is investing heavily in its own proprietary content, like Postcards from Earth, which uses the venue’s advanced technology to create a completely immersive viewing experience. This content has already generated over $300 million in high margin revenue (versus a production cost of ~$85 million). Looking ahead, Sphere has plans to develop more original content, including a potential adaptation of The Wizard of Oz, designed specifically for its venue.

Managing the cost of innovation: Sphere’s capital-light expansion strategy

Of course, no investment comes without risks, and Sphere Entertainment is no exception. The company’s biggest challenge has been the hefty price tag associated with its cutting-edge technology. The Las Vegas Sphere cost $2.3 billion to build, far surpassing initial projections.

Looking ahead, the company has stated it will take a less risky approach to expansion by focusing on licensing the Sphere concept (bringing the potential for another high-margin revenue stream), rather than committing its own capital. By adopting a “capital-light” strategy—emphasizing partnerships and licensing instead of owning each new venue—Sphere has the potential to bring its immersive entertainment experiences to cities worldwide without shouldering the same financial burden as in Las Vegas. Whether they can deliver on this promise and attract partners willing to pay such a hefty sum remains to be seen.

The upside: why now might be the time to invest

Despite these uncertainties, Sphere Entertainment has significant upside potential. By some metrics the stock is currently trading for less than it would cost to rebuild the Las Vegas venue, giving investors somewhat of a margin of safety. Based on our projection of the company’s 2026 earnings and factoring in its debt, we estimate a value of $64 per share, 48% higher than its current price.

Conclusion: a high-risk, high-reward play

For investors with an appetite for risk, Sphere Entertainment offers a unique opportunity. The company is still in its early stages, but the initial signs are promising. With its cutting-edge technology, diversified revenue streams, and ambitious growth plans, Sphere could redefine live entertainment—and deliver strong returns for those willing to bet on its success.

Sphere comes with its share of uncertainties, and it will need to prove that it can maintain momentum and manage its costs effectively. But for those who believe in the future of immersive, tech-driven entertainment, Sphere is a stock worth watching.