Can We Please STOP the Linsanity?


Can we please STOP the Linsanity?

If you are anything like me, you don't care at all about professional basketball. Well, honestly if you are like me you stopped caring about professional basketball after LeBron James gave up on his teammates and the city of Cleveland during the playoffs against the Boston Celtics. The NBA hasn't really existed to me from that point ... but starting February 4, 2012 I have not been able to avoid hearing about a certain phenomenon called Jeremy Lin.

They call it Linsanity - one of less than a handful of people from Asian decent to play in the NBA and the first Harvard graduate to play in the Association since Ed Smith in 1954. It helps that in his first game he scored 25 points. He then went off for 28 points and 23 points in his next two games, the second of which was a double-double as the point guard handed out more than 10 assists. His fourth game against the LA Lakers saw him hit for 38 points, more than perennial all-star Kobe Bryant. His point total through his first five games of 136 is more than any player since the merger and he recently hit a three pointer in the final moments to win a game at Toronto. Since that point, Lin has been nothing short of ubiquitous.

It's not likely to stop

The Knicks have a seven game win streak since Lin hit the floor, and five of their next six games are at home. The lone road game in that stretch is a February 23 trip to play LeBron James and the Miami Heat. That game will be nationally televised on the TNT cable channel. LeBron James is expected to play in at least three quarters of that game.

L-incredible Stock Moves

But why would you be reading about this on Well Linsanity has not been contained to the world of sports... it has reached and affected the stock market. The most prominent move in the market has been 'witnessed' by Madison Square Garden (MSG). MSG stock moved from $29.32 at the close on February 3, the day before the first weekend of Linsanity, to a high of $33.18 on February 13. Six trading sessions for a 13% move.

It's not all due to Jeremy Lin, but shareholders do have him to thank as MSG has improved leverage in its negotiations with Time Warner Cable. MSG was looking for higher per subscriber revenue from the cable company and with ratings of New York Knick games up 65%, its hard to imagine they won't get some of that.

The NBA work stoppage did affect the results for the company during the most recent quarter. A 66 game regular season that started on December 25, 2011 is less than the 82 game regular season schedule not including preseason games. Still the company saw revenue of $373 million and EPS of $0.33, both results were ahead of the Zacks Consensus Estimate.

Where is Susan Powter when you need her?

The solid performance of the New York Rangers has also helped the fortunes of MSG, as the hockey team is among the league leaders. Everyone loves a winner and ratings for hockey games are up 10%. The Rangers are enjoying their best start in 18 years.

The Super Bowl winning New York Giants have also helped MSG, as the company televised the victory parade and has had a hand in at least four other programs related to the football team.

As a negative, the Radio City Christmas Special saw lower total revenue as there were fewer shows outside of New York City.

Last 7 Reports

Positive earnings surprises are drivers for stock prices. Over the last seven earnings releases, MSG has five beats and two misses. Only one of the two misses resulted in a lower stock price.

Similarly, the company has beat topline estimates in six of its last seven reports. The December 2010 quarter was the lone miss, and it was a small miss at that, only 0.14%.

Expected Future Earnings

Linsanity has not have reached analyst EPS models for the next two quarters. The March 2012 and June 2012 estimates have each been sliding over the last few weeks. The March 2012 Zacks Consensus Estimate stood at $0.38 on January 27 but slipped to $0.31 by February 3 and is now $0.20 as of February 15. The June 2012 quarter has moved, but not as much. On February 3 the Zacks Consensus Estimate was $0.13 and has since been revised downward to $0.11.

For the year 2012, the Zacks Consensus Estimate has moved from $1.01 in December 2011 to a current level of $0.90. The Zacks Consensus estimate for 2013, however, has increased to $1.36 from $1.21 in October of 2011.


Growing revenues and earnings are great things, and MSG has both and continues to expand its influence in the world of entertainment. The near term spike in share prices is clearly being driven by the craze surrounding Lin and his stellar performances, but the near term weakness in future earnings cannot be ignored.


Easy comps could lead to great earnings for the company this time next year, but the near term upward move has happened in the face of near term negative earnings revisions. This means that the froth created by Jeremy Lin has expanded the multiple in way that seldom benefits long term investors. In this case, it's easy to see that this stock will return to its average multiple and investors trying to ride the Lin wave will likely be disappointed and that's the way the ball bounces.

Brian Bolan is the Aggressive Growth Stock Strategist for He is also the Editor in charge of the Zacks Home Run Investor service

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