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- CNBC’s Jim Cramer said Madison Square Garden Sports remains attractive after its recent pullback because the stock trades at a significant discount to the combined value of the New York Knicks and New York Rangers.
- He thinks a potential spinoff of the Rangers could help unlock value for shareholders, allowing investors to more fully recognize the worth of the company’s sports franchises.
CNBC’s Jim Cramer said investors looking to own a piece of the NBA Champion New York Knicks should consider buying Madison Square Garden Sports , arguing that the stock still does not fully reflect the value of its two sports franchises. “At the end of the day, the company that owns both the Knicks and the Rangers has a stock that trades like it only owns the Knicks,” the ” Mad Money ” host said Thursday. The comments came after the Knicks celebrated their championship with a parade through Lower Manhattan. Shares of MSG Sports surged 22.5% from the start of April through June 11, when the stock hit a record high ahead of the Knicks’ championship victory on Saturday. Over the past five sessions, shares have pulled back 6% as investors locked in gains. While Cramer acknowledged the championship likely boosted ticket revenue and the team’s overall value, he said the victory itself is not the primary reason to own the stock. “I’d buy MSG for one simple reason: the market capitalization of the company is currently worth less than the sum of the parts.” MSG Sports owns the Knicks, the NHL’s New York Rangers, and two small franchises in development leagues. Cramer noted that CNBC’s most recent valuation estimates put the Knicks alone at roughly $10.1 billion, while the Rangers were last year valued at about $3.8 billion. Combined, those two franchises are worth nearly $14 billion, according to CNBC’s calculations, compared with current MSG Sports’ enterprise value of less than $10 billion. Enterprise value includes the value of a company’s equity and debt. “In the end, I think that sum-of-the-parts valuation is too good to ignore,” he said. “You’re basically getting the Rangers for free.” The discount could begin to close if the company follows through on plans to separate the Rangers into a standalone business. Earlier this year, MSG Sports announced it was exploring a potential spin-off and later filed paperwork related to the transaction. “It sure seems like MSG Sports is headed toward a breakup, which would split the Knicks from the Rangers and, hopefully, help investors unlock all of this hidden value,” Cramer said, noting that the management team behind MSG Sports successfully spun off its entertainment venue business in 2020 . That company, known as Madison Square Garden Entertainment , later separated its immersive Sphere venue in Las Vegas into its own company. “Both of those stocks have been big winners in recent years,” he said of MSG Entertainment and Sphere Entertainment . Cramer cautioned that MSG Sports’ stock remains a unique investment. He said that Chairman and CEO James Dolan controls most of the voting rights through privately held Class B shares, and the company’s earnings remain modest relative to its valuation. Instead, he noted, investors are largely betting that the underlying value of the franchises continues to rise. Still, after the stock’s recent pullback, Cramer said the setup remains attractive. “I have to tell you, I like MSG Sports here,” he said. “I bet that sends this thing higher.” Sign up now for the CNBC Investing Club to follow Jim Cramer’s every move in the market. Disclaimer Questions for Cramer? Call Cramer: 1-800-743-CNBC Want to take a deep dive into Cramer’s world? Hit him up! Mad Money Twitter – Jim Cramer Twitter – Facebook – Instagram Questions, comments, suggestions for the “Mad Money” website? madcap@cnbc.com
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