Most people by now are aware that basketball great LeBron James made history last night by publicly announcing on a prime-time ESPN special that he would be leaving his long-time NBA team the Cleveland Cavaliers (James is originally from nearby Akron, OH) and joining the Miami Heat.Miami, hands-down the winner of the free-agent frenzy with the signing of not only LeBron James but also Dwyane Wade and Chris Bosh, has instantly made itself the center of the basketball universe, and Cleveland — a team that hasn’t won a major sports championship since the original Cleveland Browns did before there was any such thing as the Super Bowl — clearly feels the blow.
But can investors glean anything of relevance from this? LeBron, always one of the shining examples of sports greatness, has been taken down a couple pegs during this free-agency period, culminating in his hour-long special rather audaciously titled “The Decision.” Does this mean his top publicly traded endorsers such as Nike (NKE, Zacks #3 Rank [Hold]) and Coca-Cola (KO, Zacks #3 Rank [Hold]) are likely to take a near-term hit with the current LeBron backlash? Well, how about if they wrest the NBA crown from the Lakers in a dramatic seven-game series next June? Nike and Coke would be sitting pretty then, wouldn’t they?
Also of note is the fact that in January of this year, LeBron struck a major endorsement deal with McDonald’s (MCD, Zacks #4 Rank [Sell]), but he now finds himself heading to Miami, the home of Burger King (BKC, Zacks #4 Rank [Sell]). Does this become ground-zero for some sort of “burger wars” in the coming months and/or years? Does Burger King counter McDonald’s LeBron by signing Wade or Bosh to help them sell their burgers? We may see a burgeoning rivalry not witnessed since the Coke vs. Pepsi wars of the 1980’s.
Certainly, the glitz and glamor of Miami’s South Beach will only be enhanced by a star-studded lineup of basketball stars. Hotels, restaurants, valets, parking garages, etc. all stand to see revenues increase in a big way, as Miami Heat games will now reach the status of “events.” In Cleveland, LeBron’s celebrity and success alone generated an entire district of nightclubs and restaurants, many of which may not survive this latest disappointment. And it’s a town that’s seen many of them.
But what stocks can we recommend based on this sports-media bombshell known as “The Decision”? Well, you may want to consider tracking Rick’s Cabaret International (RICK, Zacks #5 Rank [Strong Sell]), which owns and operates adult-oriented nightclub entertainment. Rick’s is based in New York but owns prominent clubs like Tootsie’s Cabaret in Miami. Lately, analysts have been lowering earnings estimates on Rick’s, especially for this fiscal year and next. But if the LeBron-led “Super-Heat” can generate as much excitement in Miami as is currently predicted, Rick’s may see a reversal of fortune down the road.
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