Deutsche Bank's Manchester United plc (NYSE:MANU) stock price target was cut to $16 from $20.30 on Thursday. The firm maintained a Hold rating on the stock and stated that the Premier League club is currently "in limbo."
Manchester United delivered solid second-quarter results and reiterated its guidance range for revenues and EBITDA. Deutsche Bank said it has been a mixed quarter for the company.
"It generated record revenues, due to a meaningful contribution from its Champions League participation," analysts wrote. "But it also made a rapid exit from Champions League football (knocked out from the qualifying round) and the on-pitch performance has been generally disappointing."
It is felt that the club is now entering a period of uncertainty, with the new CEO, Omar Berrada, not due to start until July and speculation regarding a potential change of manager. However, Deutsche Bank says this might require another step up in player investment, albeit curbed by the ongoing restrictions from "Financial Fair Play."
Even so, the bank acknowledges that the arrival of the new strategic investor—Sir Jim Ratcliffe/Ineos—has "raised the potential for significant change at the club," although the task force set up to explore options for stadium development at Old Trafford and the regeneration of the surrounding area could "require £1bn to £2bn investment, over a 3 to 5-year period."
Deutsche Bank feels Manchester United's financial performance will be heavily first-half weighted as it faces tougher comps.
"It will carry Champions League wages, but no Champions League revenues, reducing broadcast/matchday revenues," stressed analysts. "Profits will be impacted by its final premier league position, with over £2.2 million of additional prize money for every additional place in the league (it is currently in 6th position), creating some uncertainty."
"We nudge our forecasts lower, with FY24 Ebitda down from £641.5m to £638.9m," they added. "We also adjust our Target Price to reflect the conclusion of the tender offer by Ineos."