ManU Preview: A Fans-Only stock?

There is optimism at Old Trafford after news surfaced that the Glazer family was looking to sell its stake, but that doesn't mean that profitability for the club is guaranteed.
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Fans vs Fundamentals

Football enthusiasts have different reasons for investing in Manchester United than investors. One of the issues facing the club is that regardless of its performance on the field, it's facing a tightening market with regards to its key source of income: Advertising deals. Certainly, better performance in tournaments translates into more lucrative advertising deals, but with firms around the globe looking to cut expenses due to higher inflation, sponsorship deals are likely to be less lucrative.

Protests have been a staple at matches with many MANU fans unhappy with the way US-based Glazers have been managing the Club. The latest news that it could return to British ownership might invigorate fans, but it might be the result of a more financially pragmatic Glazer empire seeking to avoid a period of tight earnings over the next few months, if not a couple of years.

What to look out for

Manchester United is expected to improve earnings both sequentially and compared to the prior year to -$0.11. But revenue is expected to continue the downward trend to $132.8M. Thus, there is likely to be particular interest in executive commentary on how to cut costs to improve margins and the outlook for the partnership market.

Of course, in terms of stock price, MANU could behave somewhat counterintuitively as fans invest in the club despite the financials. Should new ownership change the structure to improve results in the field, it could support the stock price. But it might be some time before the advertising market has improved enough to translate winning on the field to winning on the bottom line.

Back to the top?

Only last month, the share price soared above the 200SMA currently at $14 and validated the breakout following a retest. Momentum has been strong with the 38.2% Fibonacci of the $21-10 leg on the rearview mirror, and the 50% near $15.5 is the next resistance. The breach of the golden pocket at $19 will ease the path to the top.

Short-term support above the 200SMA lies at $14.50, and lower down we can observe the 50SMA near $12.5. Should the stock slides below there, a double bottom could be on the line. But with the reversal wedge ending bearish price action and an RSI divergence going from oversold to overbought in lightning speed, pullbacks are seen as opportunities to follow the new trend.

Key takeaways

Advertising deals are dwindling for Manchester United due to higher inflation, but luckily for the stock price, fans invest for different reasons. MANU fans have not been happy with the way Glazers manage the team. On the contrary, news of a British buyout might invigorate them. Manchester United is expecting improved earnings, but it also expects a continued downtrend in revenue. This makes commentary around cost-cutting and improvement of margins all more important. Despite the stock price being supported by fans, it might take time for them to see profits even if ownership changes.