Carmelo ‘Apple’: Are MSG Shares A Good Buy?

Carmelo Anthony
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Carmelo Anthony

MSG shares were up 1.7 percent in the first 10 minutes of trading on Tuesday morning, thanks to the trade to get Carmelo Anthony.

The stock, not so surprisingly, calmed down by 10 a.m. ET as the stock was basically flat on the trading session, but more that 121,000 shares of stock had been traded, already halfway to its daily average volume by 11 a.m. ET. (Track MSG Stock Here)

It's easy to understand why the price jumped.

Unsophisticated investors see green with Carmelo. The Knicks can make well north of $100 million by selling season tickets next year alone, and that's not even counting suites, and there's sponsorship money and ad revenue that will come into MSG Network. It's the MSG Network, which obviously features the Knicks and the Rangers, that is the star of the portfolio.

But gamblers have a hard time seeing the negatives or at least the reality: Costs. MSG is spending $72 million over the next three and half seasons on Carmelo Anthony and agreed to pay Amar'e Stoudemire $99.7 million over five years before the start of this season. Understand that that the teams themselves, owned by MSG, are lucky to operate at a breakeven point. Then, don't forget about the fact that most of the free cash the company has will be used to fund the $800 million renovation of Madison Square Garden.

I'm not saying I doubt MSG. I'm just saying it's hard to do the math at this point.

Questions? Comments?