Morgan Stanley Upgrades TKO Group Holdings (TKO) to Overweight
Morgan Stanley analyst Sean Diffley upgraded TKO Group Holdings (NYSE: TKO) from Equalweight to Overweight with a price target of $225.00 (from $215.00).
The analyst comments "Upgrading TKO to OW: One-Two Punch: High visibility with multi-year media rights deals for the UFC and WWE provide a solid foundation (~80% of revs are contracted), while we see inexpensive call options around partnerships (path to $1.2bn by 2030 from ~$700mn today, see Exhibit 14 ), site fees (path to ~$420mn from ~$240mn today, see Exhibit 15 ) and Boxing (could Zuffa JV with Saudi’s Sela be as big as UFC someday?). TKO has best-in-class EBITDA margins approaching 40% this year and strong FCF conversion (>60%), underscoring good cost discipline with low-single digit core direct opex growth at UFC/WWE. While OnLocation can be volatile, we are expecting +$75mn of adj EBITDA from the World Cup in the US (starting June 11). We have >20% upside to our $225 PT, which reflects ~20x EV/ EBITDA or ~28-29x FCF/sh. We are ~2% ahead of consensus on FY27 adj EBITDA at ~$2.5bn."
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Shares of TKO Group Holdings closed at $183.71 yesterday.