Everyone Follows Ronaldo. Only One Analyst Follows His Club
(Bloomberg) -- Millions of fans and only one analyst.
Juventus Football Club SpA last month became the rare soccer team to join a national benchmark stock index when it was added to Italy’s FTSE MIB. That should generate more interest in the company, and thus more trading in its shares, from investors who compare their performance to the gauge or try to track it exactly.
Yet Juventus shares are covered by just one analyst, Banca IMI SpA’s Alberto Francese, by far the fewest recommendations among companies in Milan’s benchmark, according to data compiled by Bloomberg. Drugmaker Recordati SpA has the second least, with eight. Stocks in the index have 19 analysts following them, on average.
That’s because top-level football clubs aren’t like other businesses. While savvy marketing can help sell tickets and merchandise, the biggest windfall comes only if a team wins matches, and even for a football expert it can be tough to discern how a club will fare. Juventus earned 80 million euros ($92 million) for making it to the 2018 quarter finals of Europe’s lucrative UEFA Champions League tournament.
“Ultimately a football club’s success is determined by its success on the pitch, which is enough to deter most investors,” said Richard Hunter, head of markets at Interactive Investor Ltd. in London. “There is also the issue of player wages, which tend to exceed 50 percent of a club’s income.”
Juventus, which was added to the FTSE MIB at the close of trading Dec. 21, has been its best-performing stock since then with a gain of 16 percent. The team, in the northern city of Turin, is leading the Serie A league and has won the “scudetto,” the Italian soccer title, for the past seven years. In July, it acquired star player Cristiano Ronaldo for 100 million euros.
Ronaldo, Instagram’s most-followed person, could triple the Italian club’s shirt sales by 2022, while spurring an increase in sponsorship revenue from its deals with the likes of Adidas AG and Fiat Chrysler Automobiles NV’s Jeep, Francese said in a Dec. 5 note in which the brokerage upgraded its rating to buy from hold. Banca IMI co-managed Juventus’s 2001 IPO and the firm’s parent, Intesa Sanpaolo SpA, has provided financing to the company.
Football clubs aren’t unique in having external factors that drive performance, Francese, who’s been covering Juventus since its listing, said in an interview.
“For a soccer team like Juventus, visibility on revenue and costs is pretty high as around 80 percent of sales are from recurring flows such as tickets, TV rights, sponsors and merchandise,” he said. “It’s more a content provider and entertainment company: Field results have an impact but it’s not so crucial for the financial performance.”
Including Juventus, only four of the 22 companies in the Stoxx Europe Football Index have analysts covering them. Germany’s Borussia Dortmund GmbH has three, OL Groupe SA, which owns French side Olympique Lyonnais, has two and Scotland’s Celtic Plc has one. Dutch team AFC Ajax NV doesn’t have any, according to Bloomberg data.
Even Manchester United Plc, probably the most powerful global sports brand, has only two analysts following it. The English team, which is listed in the U.S., isn’t in the Europe index.
Juventus has a market value of about 1.2 billion euros, making it the biggest company in the Stoxx football index. Manchester United has a market value of about $3.1 billion. Exor NV, the holding company of Italy’s Agnelli family, controls Juventus with a stake of almost 64 percent.
Some investors have long argued that soccer clubs really shouldn’t be listed companies, since their revenue is too unpredictable and their customer base is driven by emotion. England at one point had about 20 listed clubs, said Hunter, and now most have been taken private.
“Perhaps an exception here is Man United, whose powerful commercial machine has long been successful and income-generating,” he said.
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