Deutsche Bank has upgraded Manchester United PLC from a 'hold' to a 'buy', with its target price unchanged at US$18.
The analysts said the valuation of the football club, which is listed on the New York Stock Exchange, sits at the lower end of its sports and live events group, which they believe “is not justified”.
Currently worth US$2.24bn, the broker believes the club is significantly undervalued compared to other Premier League clubs.
In particular, Chelsea Football Club has been the centre of a number of proposed bids given the sanctions imposed and the need to sell the club, with Roman Abramovich initially demanding around US$5bn.
British property developer Nick Candy submitted a US$2.62bn bid last week for the west London club, which has since been upped significantly in the following days, according to Reuters, while there were reports of other bids north of US$2.7bn.
The Deutsche analysts said as Chelsea is one of the closest competitors to the Red Devils, the bidding for the West Londo club "highlights the upside value for Man U".
"While we do not incorporate private market valuations into our price target, we do think it is important to note that bids are reported in the media (Source: SI.com) to be £2bn+ to £3.5bn."
To put that in context, they said their $18 share price target translates to a £2.7bn valuation, while the £3.5bn up echelon of Chelsea bids equates to around $25 per share.
"That being said, we think it is important to note that it is hard to realize the high end of the valuation range unless the Glazers decide to sell the company or were to tender for the publicly held shares for a premium.
"We have no view regarding whether the Glazer's would sell any time soon, which is part of the reason we do not incorporate a takeout premium into our price target.
"In a theoretical sale, we would argue that Man U should be sold for more than Chelsea based on the metrics disclosed by Chelsea," the analysts said.