Even since the retirement of Sir Alex Ferguson in 2012, Manchester United (MANU, Financial) have been struggling on the pitch. Despite the struggles, Manchester United’s stock has performed well due to the brand value of the football club. Even after suffering from their worst season in over two decades, Manchester United signed a world record kit sponsorship deal with Adidas last year worth £750 million last year and another £5 billion+ deal for Barclays Premier League television rights.
All the credit should be given to Manchester United’s CEO Ed Woodward, who has signed multiple sponsorship deals over the last two years and as a result, Manchester United’s revenue has increased considerably.
Although the club has managed to improve its revenue sources, the long-term success of Manchester United, both the club and the stock, depends greatly on the appointment of a new manager. Manchester United has been able to attract various sponsors due to its brand’s value and worldwide recognition; however, if the club continues to perform badly—like it has been for the past 30 months—the long-term prospects of the club and the stock will be in jeopardy.
Manchester United needs to perform well on the pitch to not only attract sponsors, but also to lure world class players to the club.
When it comes to making the club play good football, the role of the manager is of utmost importance. Sir Alex Ferguson won the Barclays Premier League in the 2012 to 2013 season, but his successor David Moyes had a terrible season and finished seventh in the league with the same squad.
Consequently, Moyes was sacked and Louis Van Gaal was announced as his replacement. Although Van Gaal has done a good job at the club until now, his future in uncertain and I expect him to be sacked in the coming weeks. Van Gaal has spent roughly ÂŁ250 million on acquiring new players and has been the manager for almost 18 months, the team underperformed this season. Manchester United have failed to win their last six games and have already been knocked out of the UEFA Champions League.
Thus, I think Van Gaal will be sacked in the coming weeks and Manchester United’s future hinges on the appointment of the new manager.
Conclusion
While the stock has performed nicely due to new revenue streams, I believe the long term success of the club and the company depends on the appointment of the next manager. Investors looking to initiate a long position should wait for the sacking of Van Gaal and the appointment of the next manager before buying the stock. I would recommend buying the stock only when either Jose Mourinho or Pep Guardiola (although I prefer Mourinho) is announced as the next manager of the club.
