Can we please
If you are anything like me, you don't care at all about
professional basketball. Well, honestly if you are like me you
stopped caring about professional basketball after LeBron James
gave up on his teammates and the city of Cleveland during the
playoffs against the Boston Celtics. The NBA hasn't really existed
to me from that point ... but starting February 4, 2012 I have not
been able to avoid hearing about a certain phenomenon called Jeremy
They call it Linsanity - one of less than a handful of people from
Asian decent to play in the NBA and the first Harvard graduate to
play in the Association since Ed Smith in 1954. It helps that in
his first game he scored 25 points. He then went off for 28 points
and 23 points in his next two games, the second of which was a
double-double as the point guard handed out more than 10 assists.
His fourth game against the LA Lakers saw him hit for 38 points,
more than perennial all-star Kobe Bryant. His point total through
his first five games of 136 is more than any player since the
merger and he recently hit a three pointer in the final moments to
win a game at Toronto. Since that point, Lin has been nothing short
It's not likely to stop
The Knicks have a seven game win streak since Lin hit the floor,
and five of their next six games are at home. The lone road game in
that stretch is a February 23 trip to play LeBron James and the
Miami Heat. That game will be nationally televised on the TNT cable
channel. LeBron James is expected to play in at least three
quarters of that game.
L-incredible Stock Moves
But why would you be reading about this on Zacks.com? Well
Linsanity has not been contained to the world of sports... it has
reached and affected the stock market. The most prominent move in
the market has been "witnessed" by
Madison Square Garden
). MSG stock moved from $29.32 at the close on February 3, the day
before the first weekend of Linsanity, to a high of $33.18 on
February 13. Six trading sessions for a 13% move.
It's not all due to Jeremy Lin, but shareholders do have him to
thank as MSG has improved leverage in its negotiations with Time
Warner Cable. MSG was looking for higher per subscriber revenue
from the cable company and with ratings of New York Knick games up
65%, its hard to imagine they won't get some of that.
The NBA work stoppage did affect the results for the company during
the most recent quarter. A 66 game regular season that started on
December 25, 2011 is less than the 82 game regular season schedule
not including preseason games. Still the company saw revenue of
$373 million and EPS of $0.33, both results were ahead of the Zacks
Where is Susan Powter when you need her?
The solid performance of the New York Rangers has also helped the
fortunes of MSG, as the hockey team is among the league leaders.
Everyone loves a winner and ratings for hockey games are up 10%.
The Rangers are enjoying their best start in 18 years.
The Super Bowl winning New York Giants have also helped MSG, as the
company televised the victory parade and has had a hand in at least
four other programs related to the football team.
As a negative, the Radio City Christmas Special saw lower total
revenue as there were fewer shows outside of New York City.
Last 7 Reports
Positive earnings surprises are drivers for stock prices. Over the
last seven earnings releases, MSG has five beats and two misses.
Only one of the two misses resulted in a lower stock price.
Similarly, the company has beat topline estimates in six of its
last seven reports. The December 2010 quarter was the lone miss,
and it was a small miss at that, only 0.14%.
Expected Future Earnings
Linsanity has not have reached analyst EPS models for the next two
quarters. The March 2012 and June 2012 estimates have each been
sliding over the last few weeks. The March 2012 Zacks Consensus
Estimate stood at $0.38 on January 27 but slipped to $0.31 by
February 3 and is now $0.20 as of February 15. The June 2012
quarter has moved, but not as much. On February 3 the Zacks
Consensus Estimate was $0.13 and has since been revised downward to
For the year 2012, the Zacks Consensus Estimate has moved from
$1.01 in December 2011 to a current level of $0.90. The Zacks
Consensus estimate for 2013, however, has increased to $1.36 from
$1.21 in October of 2011.
Growing revenues and earnings are great things, and MSG has both
and continues to expand its influence in the world of
entertainment. The near term spike in share prices is clearly being
driven by the craze surrounding Lin and his stellar performances,
but the near term weakness in future earnings cannot be ignored.
Easy comps could lead to great earnings for the company this time
next year, but the near term upward move has happened in the face
of near term negative earnings revisions. This means that the froth
created by Jeremy Lin has expanded the multiple in way that seldom
benefits long term investors. In this case, it's easy to see that
this stock will return to its average multiple and investors trying
to ride the Lin wave will likely be disappointed and that's the way
the ball bounces.
Brian Bolan is the Aggressive Growth Stock Strategist for
Zacks.com. He is also the Editor in charge of the
Run Investor service
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