Manchester United Shares (NYSE:MANU): Is It Worth Buying?

Manchester United (NYSE:MANU) was recently reported to be the most valuable soccer – that’s soccer for Americans – club in the world. According to data compiled by Sporty, Manchester United is valued at $6.2 billion. However, with the club’s US-listed shares trading around $16.92 after their recent decline, the market values ​​Manchester United at just $2.8 billion. Football is a strange business, but I am quite bullish on Manchester United shares given the club’s turnaround project, long-term revenue growth and buyout potential. This could be a bathroom worth buying.

Jim Ratcliffe’s investment in Manchester United

Manchester United shares have shown considerable volatility over the past 12 months, as you can see below. The club has been the subject of months of takeover speculation, with a Qatari consortium led by Sheikh Jassim bin Hamad al Thani and INEOS CEO Jim Ratcliffe the main contenders.

For many investors, Sheikh Jassim’s proposal seemed the most favorable. Shiekh’s bid was understood to be for all the Glazer family shares and potentially those US-listed shares – 100% of the club. With a potential buyout of the listed shares on the cards, the stock pushed higher, hitting highs around $27.

However, this was not the Glazer family’s preferred offer and eventually saw Ratcliffe acquire 25% of the club, which later increased to 28%. The Glazer family currently owns 49.9% of the total outstanding shares.

Moreover, because Ratcliffe’s investment meant very little to retail investors, the stock eventually fell. Manchester United shares traded as high as $13.50.

Is there value in Manchester United shares?

Valuing football clubs is a challenge. These are not profit-making organisations, with Manchester United recording five losing quarters out of the last eight. Given the culture of football in Europe and the UK, fans would not be happy to see their clubs turned into profit machines. Instead, clubs are seen as community vehicles and something that should be run for the fans, reflecting the working class roots of the modern league.

The Markham Multivariate Model is a metric – stemming from a master’s thesis – that was developed in 2013 to provide a method for evaluating football clubs. However, when we covered the stock a year ago, the model suggested United were worth just £857m, far less than the $7.4bn the Glazers wanted for the club. The value goes as follows:

Club Value = (Revenue + Net Assets) x ((Net Profit + Revenue) ÷ Revenue) x (% Stadium Filled) / (% Wage Ratio)

Yes, the model doesn’t account for growth trajectories — one of the most important things when valuing stocks, in my opinion — but it also sheds light on the disparities between valuations.

There are a lot of things to consider when evaluating a football club. European football teams can be relegated – there are 20 tiers of English football – and things like qualifying for the lucrative UEFA Champions League have a huge impact on revenue. As such, the team’s performance on the field is very important. Will English Premier League teams ever reach the kind of ratings US sports teams command? It is highly unlikely due to the risk of regulation and not qualifying for tournaments.

But that doesn’t mean ratings can’t be expanded. The Premier League’s broadcasting rights revenue is growing, while commercial and matchday revenues are highly dependent on club success and strategic decisions.

Manchester United’s valuation figures don’t scream ‘value’. After all, it’s not set to turn a regular profit anytime soon. Owning shares in a football club is therefore more about appreciating its assets and brand value while holding out for that Qatari billionaire who might be willing to pay over the odds for your shares. It’s definitely not my normal investment model.

Rebuilding Manchester United

Manchester United have not won the league in over a decade and have rarely qualified for the Champions League. The team has exceeded the expectations of the fan base and the stadium is in dire need of an upgrade. The Old Trafford Falls – the name given to the torrent of water that pours from the gap between the stadium’s East Stand and the Sir Alex Ferguson Stand – is the fourth highest waterfall in England. Almost everyone blames the Glazers for the dire state of the club.

However, Ratcliffe is bringing change and investment. There has been a board review and the chemical tycoon is due to make a decision on whether to build or renovate the stadium later this year. More regular success on the pitch and an improved stadium – one that has more corporate seating and can host finals and exhibition matches – would undoubtedly boost revenue. There is a lot of potential to unlock. Moreover, there is talk that the state may contribute to the redevelopment of the stadium.

Are Manchester United shares a buy, according to analysts?

Manchester United shares have a consensus Moderate Buy rating. This is based on a buy rating and a hold rating assigned over the past three months. Manchester United has an average target price of $21.00, with a high estimate of $26.00 and a low estimate of $16.00. The average target price represents an upside potential of 24.1%.

The conclusion of Manchester United’s actions

With Ratcliffe’s planned investment in the club, the potential for improvements on the pitch and continued growth in broadcast income, I believe the club’s income will be headed in the right direction. While football loyalties may prevent me from investing in the club, I am bullish on the stock. I think Ratcliffe will take the club and the stock in the right direction.

Disclosure