Manchester United (NYSE:MANU) is one of the most recognisable and successful sports teams in the world. It is on my best stocks to buy now list and I want to explore whether it would be a good addition to my portfolio.
Manchester United’s share price
As I write this, the Manchester United share price is trading for just over $17. It was boosted by news of a record shirt sponsorship deal with software giant TeamViewer last week. A week earlier, its price faltered after the news that 5m shares were being sold by the Glazer family, who own a majority stake. This equates to 3% of total shares.
Prior to the market crash back in March last year, MANU’s share price was over $20. At its lowest point in the crash, shares were trading for just $12 which is a 40% drop. Since that low, its price has been fluctuating for a number of reasons, some of which I have mentioned.
The Covid-19 pandemic has massively impacted Manchester United and its income, but more on that later. I still believe at its current price, there is an opportunity to pick up cheap shares, which is why I place it on my best stocks to buy now list.
Football without fans
The past year has seen the absence of fans within stadiums. Manchester United possesses the largest club football stadium in the UK, boasting an attendance of over 74,000. Naturally, the Covid-19 crisis has affected revenue as it is estimated match day revenue can total approximately £6m per home game.
In a recent trading update, Manchester United posted a £63.9m profit for the three months to 31 December. Total revenue rose by 2.6% to $172.8m compared with the same period last year. Match day revenue fell 96% due to the pandemic. Commercial revenue declined 11% but broadcasting revenue rose 68%. This timely boost would have been due to the Premier League’s promise to broadcast all league games as fans cannot attend stadiums yet. MANU is one of the most broadcast sports teams across the world.
Best stocks to buy now still present risks
Manchester United has a lot of debt. Currently, it stands at over £400m. This can affect operations off the pitch, which in turn affect performances on it and fan appeal, which affect marketability. The club has not won any silverware for four years now. Furthermore, the sale of almost $96m worth of stock from its owners could also be a sign of those at the top cashing in on a company they may not have utmost faith in either.
I believe the current Manchester United share price is a bargain. With the vaccine rollout, I believe fans will return to stadia and match day revenue will roll in once more. Furthermore, the recent sponsorship deal worth $275m (a world record amount, matching FC Barcelona’s £47m a year deal) will boost the coffers and investor confidence.
On the pitch, Champions League qualification is beginning to look a certainty for next season. The extremely lucrative European club competition boosts income and worldwide profile massively.
Manchester United is firmly on my best stocks to buy now list as I believe it could be a contrarian reopening stock and enhance my portfolio. I am also looking at other alternatives like this FTSE penny stock for my portfolio.
Jabran Khan has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.