Everybody knows the Walt Disney Company—a storied giant that’s been weaving magic for over a century. Today, Disney’s gleaming kingdom is evolving with a major focus on streaming media, reaffirming its place in the hearts of millions. But there’s a new contender in the ring: Sphere Entertainment, previously known as Madison Square Garden Entertainment. After rebranding in April 2023, Sphere is setting the stage for an ambitious, tech-driven future.
Comparing these giants is no easy feat. Financially, Disney operates on an entirely different scale. With a market cap of $163.7 billion and trailing 12-month (TTM) revenue of $90 billion, it overshadows Sphere’s $1.7 billion market cap and $1 billion in TTM revenue. Disney’s steady profitability and a modest 23 times earnings valuation make it a robust and somewhat safe investment. Sphere, on the other hand, is navigating the tumultuous waters of growth with unprofitable ventures, highlighted by its lavish Las Vegas venue.
Sphere’s future plans involve constructing a series of advanced entertainment arenas worldwide—an endeavor fraught with financial risks. These high-tech venues, while potentially groundbreaking, come with steep capital expenditures and significant debt obligations. Interestingly, despite these hurdles, Sphere sports a lower price to sales (P/S) ratio at 1.7 compared to Disney’s 1.8, suggesting it might be undervalued if it can navigate its financial challenges successfully.
On the flip side, Disney’s venture into the digital era is already bearing fruit, from hit streaming services to successful sequels like “Inside Out 2” and “Deadpool & Wolverine.” Despite its extensive asset portfolio making Disney appear costly in some respects, its ratios like price to free cash flow and price-to-book remain attractive. This makes Disney a reliable choice for potential investors, embodying a sense of stability and growth potential in any economic climate.
In conclusion, while Sphere represents a thrilling, albeit speculative, investment with its futuristic vision, Disney stands out as the more reliable and established choice. Yet, for those with an appetite for risk and a long-term horizon, a small stake in Sphere could be enticing.
What do you think about this matchup between Disney and Sphere Entertainment? Share your thoughts in the comments below and join the conversation!
Source: Anders Bylund, The Motley Fool
