Jefferies & Co, the lead underwriter in Manchester United Plc's IPO last month, started coverage of the English football club with a "buy" rating, saying the company was poised to gain from increasing media appetite for live content.
"We view Manchester United as a key beneficiary of the changing media world where advertisers are willing to pay up for (live) content and want to associate with powerful brands that are recognized globally," Jefferies analyst Randal Konik said in a note to clients.
The club's 659 million followers worldwide make the team a valuable global asset which can be monetized through a number of existing and potential sponsorship deals, said Konik, who started the stock with a $20 price target.
The club had a flat market debut on August 10 and its shares closed below its IPO price of $14 after the first week of trading. It closed at $13.30 on Friday on the Nasdaq.
The club is owned by the Glazer family, which has interests ranging from shopping malls to the Tampa Bay Buccaneers football team, and has won the English Premier League title a record 19 times.
Nomura Equity Research, also one of the book runners for the offering, took a more watchful approach as it remained cautious about greater-than-expected player cost inflation and valuation, starting the stock with a "neutral" rating.
Nomura said it was concerned that a large portion of the club's revenue growth would be consumed by player salaries and transfer payments, and started the stock with a $13 price target.
Manchester United filed to go public in July and classified as an "emerging growth company" under the new Jumpstart Our Business Startups (JOBS) Act.
Banks underwriting an IPO are typically prevented from publishing research on the company until 40 days after the deal.
But the JOBS Act, which allows for confidential filing of registration statements and lesser financial scrutiny for a company with under $1 billion in annual revenue, enables underwriters to publish research immediately following the IPO.
(Reporting by Aman Shah in Bangalore; Editing by Saumyadeb Chakrabarty)