Behind the Money

'Linsanity' Knows No Bounds; Analysts' Comments Push MSG To Record


It may be a small cap with just $2.5 billion in market value, but based on the analyst and media attention it’s garnered lately you would think Madison Square Garden  was Apple or the Facebook IPO.

Jeremy Lin
Getty Images

That’s “Linsanity” for you.

On Tuesday alone at least three analysts put notes out that mention the positive effects of the mid-season breakout by point guard Jeremy Lin. The bullish comments have pushed shares of MSG up 15 percent on the year and to their highest level since the company was spun out of Cablevision two years ago.

Analysts cite the Harvard grad's outstanding play this month as the catalyst that pushed MSG and Time Warner Cable to settle their dispute. The four-month blackout by the New York City cable company kept New York City Knicks fans from witnessing at home the transformation of Lin from basketball benchwarmer to global superstar.

“It appears that the success and sudden popularity of recent Knick addition Jeremy Lin helped bring greater political pressure to both sides to come to terms,” said Morgan Stanley analyst Benjamin Swinburne in a note entitled “Jeremy Spoke & a Deal Gets Done.” The analyst for Morgan Stanley, which owns the world’s largest brokerage, rates the shares “overweight.”

Lin, who was nearly cut before injuries and a struggling offense forced the Knicks to give him a shot, is averaging 25 points and nine assists per game since bursting off the bench 10 games ago. The team has gone 8-2 over that span.

“Nielsen ratings were up 109 percent (a 3.79 rating, or 280,000 households in the New York market, despite not being in 30 percent of MSG Network homes) in Jeremy Lin’s first six starts since he was added to the Knicks lineup,” wrote Miller Tabak & Co. analyst David Joyce, who has a $35 price target on the shares, in a note Tuesday. “We are increasing our Madison Square Garden Company estimates to add back in a half-quarter of MSG and fuse network carriage fees (and better advertising revenue) due to the resolved dispute with Time Warner Cable.”

Some analysts see the Linsanity effect as a bigger driver than just helping MSG close the deal with Time Warner Cable. Along with owning the sports cable network, MSG operates its namesake stadium, which is undergoing an almost $1 billion renovation. The company also owns other venues including Radio City Music Hall as well as the Knicks and Rangers hockey team.

“If Jeremy Lin and other marquee players drive sell-out ticket sales at underperforming team home games then it is possible that the overall BRI (basketball-related income) pie could expand dramatically,” wrote Rich Tullo of Albert Fried & Co. on Tuesday. “We think if the Knicks and the Rangers continue on their winning ways then MSG can drive incremental revenue from higher ticket, concessions and luxury suite sales.”

To be sure, some traders think this kind of attention for such a small stock may be driving the shares a little too far too fast.

“The sell side is writing about the stock because it generates trading tickets,” said Josh Brown, author of the popular “The Reformed Broker.” “The buy side is fixated on the stock, so not covering it means letting the other firms' trading desks make all the money.”

MSG shares hit an all-time high of $33.49 during trading Tuesday and have doubled the share price return of their former parent,Cablevision , this year. The shares gained even as the Knicks lost at home to the Nets and its star point guard Deron Williams on Monday. Lin had 21 points, nine assists and seven rebounds.

“It is exactly the right time to fade the Linsanity move in MSG stock,” said Jim Iuorio, a managing director at TJM Institutional Services. “I love what he has done, but the recent rally reflects the highest level of interest and hype. These things tend to pass quickly, particularly when you see him compared to a top-flight NBA guard as we did yesterday.”

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