August 22, 2022, Madison Square Garden Entertainment Corp. (NYSE:MSGE) and Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY)
These are the best stocks to buy now if you want to invest in some fun.
With the state of the world nowadays, you’d probably jump at the chance to invest in a distraction. Inflation is still a thing, rates are rising, there’s a war in Ukraine, there’s still pandemic talk, and the U.S. has other issues. The market also had its worst week in about a month, and the summer rally appears to be fizzling. So with people needing fun more than ever, consider Madison Square Garden Entertainment Corp. (NYSE:MSGE) and Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY) the best stocks to buy now.
They aren’t just the best stocks to buy now because they offer sports, entertainment, and fun distractions. They’re the best stocks to buy now because they’re good companies.
Madison Square Garden Entertainment popped on Friday (August 19, 2022) following an earnings report demonstrating resiliency and better-than-expected revenue and year-over-year growth. Investors especially loved the news that it’s considering spinning-off its live entertainment and MSG Networks businesses. With strong net income growth projections and improving sentiment, there’s reason to believe that analysts could soon start upgrading the stock hand-in-hand with more momentum.
Dave & Buster’s, the restaurant, arcade, and entertainment space chain, is also positioned as one of the best stocks to buy now because its stock is on fire, has solid fundamentals, yet remains at an attractive valuation. With almost a 20% analyst upside and a recent earnings beat demonstrating phenomenal growth potential, it’s a no-brainer.
Why else are MSGE and PLAY the best stocks to buy now? Read on to find out.
Madison Square Garden Entertainment Corp. (NYSE:MSGE)
Spin-off plans and high-growth earnings have this entertainment conglomerate buzzing.
MSGE is a prominent entertainment industry player. When you hear Madison Square Garden, you immediately think of nicknames like the “World’s Most Famous Arena” or the “Mecca of Basketball.” The name Madison Square Garden alone speaks for itself.
But the Company, Madison Square Garden Entertainment Corp., does so much more than own the stadium it’s named after. It also owns and operates the following venues and produces presents, and hosts sporting events, concerts, and other special events at the following venues.
- Hulu Theater
- Radio City Music Hall
- Beacon Theater
- Chicago Theater
Executive Chairman James Dolan also owns the New York Knicks and the New York Rangers. The Knicks are adding more floor seats for the 2022-23 NBA season. It’s simple math. 41 home games plus more premium-priced seats equal a significant bump to the Company’s top line.
If you want a vested rooting interest in this stock, follow the Knicks and root for a long playoff run. Extra floor seats at elevated prices plus bonus games? Especially after the nosebleed seats during the Knicks’ 2021 playoff run went for exorbitant prices? NYC is a basketball town, and people are willing to pay.
Another little-known fact is MSGE also operates 61 entertainment dining and nightlife venues in 23 markets and five continents under the Tao, Marquee, Lavo, Beauty & Essex, Cathédrale, Hakkasan, and Omnia brands.
What’s especially relevant for now is that MSGE also owns MSG Networks.
MSGE is one of the best stocks to buy now because of its upside potential if it spins off its live entertainment and MSG Networks businesses, as it hinted before Friday’s (August 19, 2022) earnings call. The stock popped as much as 14% on the news and continued its 35.03% run since its $48.07 lows on July 13, 2022.
Investors See Lucrative Potential With MSGE’s Spin-Off Plans
MSGE was a big market-mover following its full-year and Q4 2022 earnings announcement on Friday (August 19, 2022).
First, for the quarter, MSGE’s revenue knocked it out of the park. Revenue came in at $453.5 million, $39.54 million above analyst estimates, and at a 74.0% year-over-year increase.
Fiscal 2022 figures were even more encouraging, though. On top of its gross profit margin coming in at 39.0%, MSG reported some eye-popping growth.
- Revenue roughly doubled from $814.2 million in the prior year to $1.7 billion
- Operating loss narrowed from $188.2 million in the previous year to $102.7 million
- Operating income surged 232.34%, from $40.2 million in 2021 to $133.6 million in 2022.
Investors also cheered MSGE’s spin-off plans. The potential could be significant with the board exploring potential spin-off opportunities that would separate its live entertainment and MSG Networks businesses from its hospitality segments.
Spin-offs tend to bolster shareholder value by creating two separate entities that focus on their specialties. At the same time, the parent Company, in this case, MSGE, still retains a stake. So it’s a win-win for everyone.
The future is bright for MSGE moving forward, with earnings expected to turn positive in the coming year and net income expected to grow 86.3% and by an average of 124.4% over the next five fiscal years.
Analyst Upside is Set to Improve With the Sentiment
Analyst upside for MSGE has been relatively light over the last 3-months. Only 2 Wall Street analysts offered a 12-month price target, with a high of $73.00 and a low of $63.00. Although you can conclude what you want from two analyst price targets, the average price is $68.00, which indicates a 4.28% upside from August 19, 2022’s $65.21 close.
However, from its earnings report and spin-off plans, you can conclude that analysts and investors will soon rush into this stock. Both above and beneath the surface, sentiment appears to be improving significantly. For example, MSGE, according to MarketBeat data, MSGE has a news sentiment score of 1.22 over the last week on a scale of -2 (bad news) to 2 (good news).
Additionally, beneath the surface, just 4.03% of its outstanding shares have been sold, and short interest in the stock has recently decreased by 3.50%, indicating an improvement in investor sentiment.
While it does come with some risk, there is no doubt that the Company is doing what it needs to do. Just wait and see what happens once the NBA and NHL season starts.
MSGE’s year-to-date low and high are $48.07 and $80.58, respectively.
Dave & Buster’s Entertainment, Inc. (NASDAQ:PLAY)
Undervalued, underappreciated, and surging with bullish fundamentals, technicals, and a 20+% upside.
What better place than Dave & Buster’s to go to for a kid’s birthday or some drinks with your friends for the UFC fight? For too long, Dave & Buster’s has been an underappreciated stock at the mercy of COVID and inflation. But fortunes appear to be changing in a big way. The stock has rocketed 42.91% since touching its $29.60 lows roughly six weeks ago and has plenty of room to continue the momentum.
PLAY has all the ingredients you want. It has a strong footprint in North America with 144 stores in 40 states, Puerto Rico, and one Canadian Province. Recent earnings beats, growth potential, strong fundamentals, analyst upside, and all at a relatively cheap valuation are why it’s the best stock to buy now.
Take the load off and enjoy a cold one with this stock.
Blowout Earnings Nowhere Near Peaking
Dave & Buster’s won’t report its Q2 earnings until September 8, 2022. But judging from its Q1 figures from early June, expectations are high.
Last quarter, PLAY reported $1.35 EPS beating the consensus estimate of $1.16 by $0.19, marking a 237.5% year-over-year improvement. Revenue also came in at $451.10 million compared to analyst estimates of $440.63 million and at a 70.0% year-over-year increase.
We’ll see how its subsequent earnings in a few weeks impact these projections. But, for now, Dave & Buster’s earnings are expected to grow by 12.06% in the coming year, net income could rise by 58.7%, and revenue could increase at a 5.3% 5-year CAGR.
Strong Fundamentals at a Discount
PLAY’s stock price has scorched in the last month or so, but it remains one of the best stocks to buy now, simply because its multiples show it’s very buyable. Despite PLAY’s 42.91% run since July 13, 2022, it trades with a
Several strong fundamental indicators bolster PLAY’s surprising value case. Its 8 out of 9 Piotroski Score is an excellent way to start since it’s nearly perfect and indicates healthy Liquid Balance Sheets, Profitability, and Operating Efficiency.
Many of its fundamental margins confirm this, such as its 80.6% ROCE, 32.3% gross margin, 17.0% operating margin, and 10.6% Unlevered ROA.
It also clearly has staple cash flows and financials based on its 11.3% free cash flow yield and 3.8% shareholder yield.
Significant Technical Upside
PLAY’s rally, from a technical perspective, is nowhere near finished. It’s one of the best stocks to buy now because, despite its breakout, it still trades around its first support level and remains below its first resistance point.
Barchart sees several BUY indicators and gives the stock a 100% BUY rating for the short-term and long-term.
- 20 Day Moving Average
- 20 – 50 Day MACD Oscillator
- 20 – 100 Day MACD Oscillator
- 20 – 200 Day MACD Oscillator
- 50 Day Moving Average
- 100 Day Moving Average
- 150 Day Moving Average
- 200 Day Moving Average
- 100 – 200 Day MACD Oscillator
Analysts See a 20+% Upside
TipRanks data reveals that 7 Wall Street analysts offered 12-month price targets for PLAY in the last 3 months, with a high of $66.00, a low of $36.00, and an average of $50.71. The average price target represents a limited 20.31% upside from August 19, 2022’s $42.15 closing price.
PLAY’s year-to-date low and high are $29.60 and $52.54, respectively.
