Madison Square Garden Entertainment's (MSGE) potential monetization of the Theater at the Garden could drive incremental capital returns for shareholders, though that enthusiasm is likely already baked into the share price, Seaport Research Partners said in a note on Monday.
Madison Square entered into a memorandum of understanding with Penn Transformation Partners earlier this month, in connection with the proposed redevelopment of New York Penn Station, the company said in a recent filing.
As part of the redevelopment, a grand entrance to a new train hall will be constructed on 8th Avenue by removing the Infosys Theater, Amtrak, which is more formally known as National Railroad Passenger Corp., and Penn Transformation Partners said last week. The Theater at Madison Square Garden was renamed to the Infosys (INFY) Theater at Madison Square Garden, the companies said in February.
The MOU contemplates the transfer of the Infosys Theater to Penn Transformation Partners, subject to further negotiation and execution of definitive documentation, Madison Square said in the filing.
Madison Square's share price has crossed Seaport's recently-increased $80 price target. The brokerage downgraded the stock to neutral from buy.
"MSG Entertainment shares now largely reflect the strong fundamental growth for (fiscal 2026), the positive upcoming event visibility, and the hopes for possibly monetizing the Theater at the Garden (which could mean incremental opportunistic capital returns," Seaport senior analyst David Joyce wrote.
Madison Square has been working toward an estimated 11.5% adjusted operating income growth for fiscal 2026, and could see a similar rate in 2027.
Live Nation Entertainment (LYV) can command more volume and pricing growth than Madison, Joyce said.
"While we like (Madison Square's) assets and growth outlook, and it may indeed offer some form of opportunistic capital returns if and when a sale of the Theater at the Garden materializes, we think it is closer to the upper bound of its AOI/growth ratio and should trade at somewhat of a discount to (Live Nation)," Joyce said.
Madison said in May that its fiscal third-quarter revenue increased year over year, while adjusted operating income plunged 20%.
Price: $80.94, Change: $+0.64, Percent Change: +0.80%