Genius Sports, Sportradar ‘Secular Winners,’ Says Analyst
Data providers are preferred ways for playing sports betting boom
Analyst says duopoly status is a long-term catalyst
The Sports Betting Data-Provider Investment Thesis Has A Long Runway Ahead Of It
Proving there’s merit in investing in the business-to-business (B2B) side of the gaming industry, Genius Sports (NYSE: GENI) and Sportradar (NASDAQ: SRAD) are up 18.5% and 69.1%, respectively, year to date.
Why Analysts See These Companies As Long-Term Winners
We see the sports betting data providers as long-term secular winners. While there may be volatility over short periods of time, we believe they are long-term winners,” wrote Deutsche Bank analyst Steven Pizzella in a report out Monday.
Benefits Of Duopoly Status
Duopoly Status Benefits Genius Sports
While that status has invited some legal challenges against the data providers, Pizzella sees the duopoly as a long-term tailwind for Genius Sports. He says Genius is a prime play on live betting with a strong balance sheet that could eventually lead to shareholder rewards.
Genius Sports Catalysts
Genius catalysts include “increased in-play betting, led by GENI’s BetVision product, which should drive higher take rates, revenue, and margins; 3) room to flex the balance sheet (net cash) for further M&A, to expand GENI’s value chain, and for potential capital return,” observes the analyst.
Why Genius Sports Can Thrive In A Volatile Market
In the current market setting, one of the biggest advantages Genius Sports can offer investors is that it’s not tethered to the consumer-facing side of the sports-wagering industry. Rather, its primary clients are gaming companies that rely on Genius’ real-time data to expand and power their betting menus.
Why Sportradar Is Reasonably Valued
Although the stock is up 69.1% year to date, with some analysts arguing it should be valued more like a software name and less like a gaming equity, Sportradar isn’t demanding on valuation, according to Pizzella.
The Strong Growth Profile Of Sportradar
In fact, the stock may be attractively valued relative to the long-term growth outlook. The long-term Sportradar thesis is underpinned by a variety of factors, including “1) one of the strongest growth profiles within our coverage universe, (DBe ~27% 3-year adjusted EBITDA CAGR), 2) a strong balance sheet, in a net cash position, 3) increased operating leverage in the out years, 4) key long-term contracts, locked in for approximately six years on average, 5) increasing wallet share from cross sell and up sell opportunities, and 6) a reasonable valuation, when looked at in terms of SRAD’s growth prospects and comps,” concludes Pizzella.
Conclusion
In conclusion, Genius Sports and Sportradar are well-positioned to benefit from the growing sports betting market. With their strong balance sheets, growing fixed revenue streams, and increasing operating leverage, these companies are poised for long-term success.