Key insights
- The author suggests a short-term long position in MSGS based on the Knicks' playoff success, arguing the market hasn't priced in the increased revenue and franchise value. A championship win could drive significant appreciation, while a loss in the finals would have limited downside. The potential spinoff of the Rangers adds further upside.
Knicks are on a historic 11 game winning streak in playoffs and they are 4 games away from a championship. Sure, they won’t be favorites against Spurs or Thunder but those two are locked in a death match.
The added revenue from home games and value-add of the franchise making it this far is not priced in the market. Analysts expect the Knicks franchise alone is worth over $8.5 billion. If they spinoff the Rangers, it’s much more than current values. Losing in the finals won’t have a huge impact but winning can mean an additional 25-50% appreciation.
Position: 50 shares of MSGS, options are not liquid enough.