Genius Sports Has Upside Levers, Says Analyst
Quite quietly, Genius Sports (NYSE: GENI) has gained 23.30% so far this year, making it one of the top-performing sports betting stocks. This includes a surge of 12.72% in the last month.
According to some analysts, investors stand to gain more from the sports betting data supplier. David Bain, an analyst at B. Riley, reaffirmed his "buy" recommendation on Genius in a note to clients today. The company has a $10 price target, which indicates a 31.2% increase from today's finish.
"On its 2Q24 earnings call, GENI stated it expects 20%-plus revenue growth for the ‘foreseeable future,’” wrote Bain. “However, calendar year (CY) 25E consensus sales growth is 14%. 20% growth from CY24E estimates implies an additional $29M of CY25E revenue versus consensus. Using GENI’s general midpoint flow-through guidance implies an additional $12M of EBITDA, 11% higher than CY25E consensus EBITDA estimates.”
Since the NFL's official, real-time play-by-play statistics are the only source available to sportsbook operators and football is the biggest wagered sport in the United States, Genius may be even more targeted as football season approaches.
Genius Sports May See Short-Term Gains
Although Genius is a business-to-business company, the assumption that bettors will place more bets on the NFL than ever before could be a true trigger for the already high-flying stock. The start of the football season is considered as a boom for a variety of gambling companies.
Genius may also be sparked by predictions that in-game or live betting will increase this football season. The announcement earlier this week that DraftKings (NASDAQ: DKNG) is purchasing Simplebet in an attempt to expand its live micro-betting capabilities lends credence to that thesis.
“We estimate a 500 bps mix shift to U.S. OSB NFL-only in-play from pre-match wagering equates to an additional $3M of EBITDA to GENI. Operators have been transparent about increasing the in-play mix of betting with additional propositions, placing in-play betting opportunities, and using low-latency technology (including GENI’s BetVision),” noted Bain.
The analyst continued by saying that markets might not yet completely understand the potential benefits that expanding in-game wagering could have for Genius shares.
There Are Other Catalysts at Genius Sports
One of the biggest social media networks in the world, X (previously Twitter), and Genius announced a partnership in July. As per the agreement, Genius will use its ad-tech products to provide ads that are relevant to discussions happening on X.
Ad-tech may be an unexpected driver of Genius' stock price growth and income diversification as additional media rights talks approach.
“While more difficult to quantify, we believe many of GENI’s new ad tech offerings — ads placed directly into live streams or a self-service platform offering GENI’s unique data for advertisers to use in ad buys (100% margin business for GENI) — are potential levers for media growth relative to consensus. We believe some U.S. take-rate negotiations will benefit GENI’s media division with higher go-forward commitments,” concluded Bain.
