Manchester United Plc (NYSE:MANU) continues to offer “plenty of promise” after the football club posted “relatively clean” fiscal third quarter results earlier this month, according to Deutsche Bank Research analysts who have boosted their price target on the stock.
On July 10, the club posted Q3 revenue of about $173.4 million, ahead of estimates of $162.9 million, while a loss per share of $0.31 was greater than the loss per share of $0.27 expected.
Revenue was down 19.6% year-over-year attributed by the analysts to fewer matches hosted during the quarter, particularly after the club’s early exit from the Champions League.
Manchester United also reiterated its full-year guidance of revenue of £460 million of revenues and £140 million of earnings before interest, taxes, depreciation and amortization (EBITDA), which are targets both within 2% of the club’s earlier guidance ranges, the analysts pointed out.
They expect Manchester United to unveil its full-year results in September along with a new strategy outline, confirming cost-cutting measures.
“We expect some guidance on new player spending, and a focus on improving trading profits from player investment and tighter cost control and more disciplined cash management should increase the availability of cash for player acquisition,” they wrote in a July 24 note.
“We would expect to see at least £15 million of savings from headcount cuts and at least £30 million from the program.”
Discussions around the redevelopment or refurbishment of the club’s football stadium Old Trafford are also anticipated.
The analysts added that it is becoming apparent there is an “increasingly significant financial influence” from new 27.7% shareholder Sim Jim Ratcliffe, which they believe will put upward pressure on forecasts.
“Thus far, the role of that buyer (Sir Jim Ratcliffe) has been somewhat unclear, beyond his taking control of ‘football operations’ but the extent of senior management changes thus far suggests the intention to take control of financial management as well,” they wrote.
“Management has moved quickly to right-size the business, which should generate material savings in fiscal 2025 and the group has pushed through the first rise in ticket 11 years (a 5% increase), and achieved record retention rates of over 96%.”
As such, the analysts upped their price target to $18.50 from $16 and reiterated their ‘Hold’ rating.
Manchester United shares traded flat at $16.85 on Thursday afternoon.