Shares of Sphere Entertainment shot up to $38.8 during today's morning trading session -- an increase of 5.6% that brings the stock 53.18% over its average analyst target price of $25.33. This may imply limited upside for the Leisure stock, whose analysts give it a consensus rating of hold, and target prices spanning from $25.0 to $26.0 dollars per share.
To understand the market's outlook on the stock, we can look at Sphere Entertainment's short interest: the proportion of the fshare float that is tied to short positions. Behind each short position is an investor who believes that the stock will decline in the future. Here, the stock's short interest is 14.5% which means the outlook is split.
When a stock is sold short, it means an investor has borrowed shares of the stock from their broker, and then sold them at the going market price. The investor hopes for the price to decline, so that they might buy those shares back at a lower price in the future. Once they do, they can return the borrowed shares to their broker, and keep the profit they made on the transaction.
Another way to gauge the sentiment on Sphere Entertainment is to look at the percentage of institutions that are invested in the stock. In this case, 69.8% of the shares are held by pension, mutual, and hedge funds, which shows that these institutions probably have strong confidence in the stock.
If institutions are invested in a particular stock, it shows in most cases that they have performed quality research and concluded that it is a good investment. In some cases, however, increases in institutional ownership could be a sign of a takeover attempt or proxy fight, which can actually injure share prices. Also, institutions are not infallible, and can certainly make miscalculations -- often with spectacular results.
In conclusion, we see negative market sentiment regarding Sphere Entertainment because of an analyst belief that shares are overpriced, a hold rating, an above average percentage of its shares sold short, and an average number of institutional investors. At Market Inference, we believe that any investment decision should be preceded by an in-depth analysis of the company's fundamental values and a comparison with similar stocks.
Here's a snapshot of some important facts to keep in mind about SPHR:
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The stock has trailing 12 month earnings per share (EPS) of $-3.75
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Sphere Entertainment has a trailing 12 month Price to Earnings (P/E) ratio of -10.3 compared to the S&P 500 average of 15.97
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The company has a Price to Book (P/B) ratio of 0.66 in contrast to the S&P 500's average ratio of 2.95
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Sphere Entertainment is a Consumer Discretionary company, and the sector average P/E and P/B ratios are 22.33 and 3.12 respectively
