Manchester United Plc (NYSE:MANU) shares represent a significantly less attractive investment in the wake of Sir Jim Ratcliffe’s INEOS taking its influential stake in the business, according to analysts at Deutsche Bank.
The German bank, in a note, has cut its share price target to $16.00 from $20.30 (versus a market price of $14.67) and retained a ‘hold’ rating.
It comes after the Manchester football club on Tuesday reported its second-quarter earnings, showing record sales of £225.8 million, and underlying profits up by almost 90% to £91.4 million.
Management is confident in achieving fiscal full-year profit guidance of between £125 million and £150 million. Revenues are expected to keep within forecasts, reaching between £635 million and £665 million.
That guidance was, however, downgraded in January after the club was dumped from the Champions League, after its worst-ever campaign in the tournament.
Significantly, the results come as the incoming influence of INEOS is being felt and a significant restructuring of operations is progressing.
Analysts at Deutsche described the quarterly results as “solid”.
“It was a mixed quarter, with record revenues, due to a return to Champions League football, but a rapid exit from the competition. ManU is entering a period of uncertainty,” the bank’s analyst said.
“The new CEO is not due to start until July, but new strategic investor (Sir Jim Ratcliffe/INEOS) is already looking at significant potential change, with the possibility of a participation in a £1bn to £2bn investment in a new stadium, as part of regeneration plans for Old Trafford.”
Deutsche’s own forecast meanwhile was clipped lower, with full earnings now estimated at £638.9 million from £641.5 million.