Shares of sports teams and the companies that help fans enjoy the game surged Monday on an announcement by Pfizer that a potential COVID-19 vaccine appears to be developing at a best-case scenario of 90% effectiveness, opening up the promise of live events filled with fans in 2021.
“This is the day we’ve been waiting for. We wanted to see an announcement to give us hope that there was a vaccine,” said Rob Lutts, president and chief investment officer of Cabot Wealth Management, a private wealth manager in Salem, Mass. “The whole perception of the market now is that we have a solution, not a problem.”
The JohnWallStreet Sports Stock Index reflected widespread optimism, advancing 4.3% midday Monday. Live event stocks led the gainers. Live Nation shares were up nearly 23% to $68.87, its largest one-day advance in at least 12 years. It was one of eight companies in the Sportico index to be up double-digits Monday. Madison Square Garden Entertainment, which owns performance venues including the Garden, as well as MSG Sports, a sister company that owns the New York Knicks, New York Rangers and minor league teams, were both up more than 20%.
MSG Sports in particular shows investors betting on the return of full, fan-filled seasons, because it reported disappointing quarterly financial results ahead of trading Monday. Despite taking in $57 million, mainly from the Knicks’ and Rangers’ respective NBA and NHL revenue-sharing distributions, the company missed revenue targets during the quarter that ended Sept. 30, losing $17.8 million while refinancing $600 million in debt to help it weather the pandemic. Still, shares added more than $22 to hit $174 midday.
“What’s happened is the market turned in a nanosecond from rewarding COVID plays. The whole investing theme of ‘if you’re indoors, you win and if you’re live, you lose’ just got reversed,” explained John Tinker, who follows sports equities as director of research at G. Research, an arm of investment manager Gabelli & Co. “You need to sell season tickets and sell those beers, so this is big.”
Tinker noted that teams especially reliant on attendance revenue, including the Atlanta Braves and Manchester United, gained more than 12% each on hopes of future attendance. Also among strong gainers was Aramark, up 15%, since it relies on live event concessions for one-third to one-half of its revenue.
Sports-related companies that benefit from people hunkering at home, on the other hand, fell. Activision, which makes Tony Hawk’s Pro Skater and the esports staple Call of Duty, slipped 3%. Take Two, publisher of the NBA 2K and PGA Tour 2K games, dropped 6% despite a strong earnings report Friday, and Collectors Universe, which rallied on a newfound love of sports cards this summer, tumbled 7%. “The same way the market tends to overbuy, they tend to oversell, said Tinker. “The success of ‘inside’ companies was fully priced in and the failure of ‘outside’ companies was also fully priced in, so any change has an impact.”
The JohnWallStreet Sports Index is an equally weighted group of 40 equities reflecting the state of the sports business, including sports teams, media businesses, gaming and fantasy sports companies. The index was constituted at 1,000 on August 1, 2020 and is up more than 23% since, to 1,231.
While the vaccine news likely will remain bullish for stocks, it doesn’t mean shares will only head one way, added Lutts: “Is it all up, up and away from here? Not likely. But now we’re less focused on the defensive, digital stocks and more on the recovery stocks.”