On Wednesday, Deutsche Bank (ETR:DBKGn) adjusted its outlook on Manchester United (NYSE:MANU), reducing the soccer club's price target from $20.30 to $16, while maintaining a Hold rating on the shares. The bank's analyst cited a mix of achievements and challenges in Manchester United's recent performance, including solid second-quarter results and the reaffirmation of revenue and Ebitda guidance.
Despite achieving record revenues through their Champions League participation, the team's early elimination from the competition and overall disappointing on-field performance were noted as concerns.
The club is currently navigating a period of uncertainty, with a new CEO set to begin in July and rumors of a potential managerial change that could necessitate increased investment in players. These factors are compounded by Financial Fair Play restrictions.
Moreover, the entry of Sir Jim Ratcliffe's Ineos as a strategic investor has introduced the possibility of significant changes at Manchester United. Ineos has initiated a task force to explore development opportunities for the Old Trafford stadium and the local area, which may involve an investment of £1 billion to £2 billion over the next three to five years, partially supported by public/private partnerships.
Financially, Manchester United is expected to face a more challenging second half of the year, as it will incur Champions League-level wages without the corresponding revenues. The club's final Premier League standing could also impact profits, with each additional league position worth over £2.2 million in prize money. Currently in sixth place, this adds an element of unpredictability to their financial outcomes.
Deutsche Bank has revised its forecasts, with projected FY24 Ebitda decreasing from £641.5 million to £638.9 million. The adjustment in the target price reflects the completion of Ineos's tender offer, which saw the acquisition of a 25% stake in Manchester United's B shares at $33 each. The new target price implies a 3.6x FY24E EV/Sales ratio, which is above the valuation of other European clubs but justified by Manchester United's global brand presence.
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