Clearly, there’s something about football season and its impact on sports wagering equities. Genius Sports (NYSE:GENI) stock is flirting with a gain of eight percent this week and is higher by 21.6 percent over the past month.
That torrid pace isn’t preventing some analysts from waxing bullish on the sports betting data provider. In a new note to clients, B. Riley analyst David Bain resumes coverage of Genius with a “buy” rating and a $32 price target. That implies upside of more than 39 percent from current levels.
GENI’s established and augmenting market position captures visible, continuous, forward online sports book (OSB) total addressable market (TAM) increases, as well as growing OSB marketing spend (a second significant TAM feed),” says Bain.
“While we value GENI similarly to other B2B online gaming companies, we believe GENI’s deep technology and online, operational integration with the sports industry could eventually unleash valuation multiples akin to SaaS companies, offering significant potential upside to our price target,” Bain continued.
“SaaS” refers to software as a service, vernacular that’s commonplace in the technology sector, indicating that one way of interpreting the above comments is that Genius should be valued more on par with a cloud computing company and less as a sports betting enterprise.
Genius Stock Fantastic Football Play
Genius Sports became a freestanding public firm in April following a merger with a special purpose acquisition company (SPAC). Its seasonal tendencies as they related to the sports calendar haven’t been tested over multiple years.
However, it’s clear Genius stock is responsive to the start of football season, which makes sense because that’s the most wagered-on sport in the US. This week, the company inked deals with several sportsbook operators to provide marketing technology and support.
Genius doesn’t operate as a consumer-facing sportsbook. Rather, sportsbook operators buy data from the company and its competitors. It’s expected those purchases will increase over time, as regulated sports betting and in-game wagering increase in popularity in the US. As Bain notes, that could be a long-term positive for Genius stock.
“OSBs require an extensive, continuous supply of betting content, positioning real-time sports data as the nucleus of the sports betting ecosystem, in our view,” said the analyst. “Showcasing the importance of reliable, high-accuracy, real-time data, close to 80% of European OSB wagers are in-game bets. We estimate US in-game betting already accounts for close to 30% of wagers, and these wagers should eclipse 50% of the total by 2023.”
More Avenues for Genius Upside
While the investment community primarily views Genius as a data provider, the company has other levers to pull to diversify its revenue stream.
“GENI’s Media Tech division possesses unique and sometimes proprietary access to sports data, live odds, and multiple media outlets/websites for heat mapping and analytics—all of which allow for more targeted, effective marketing options for OSBs,” adds Bain. “Already, GENI has more than 100 media and advertising customers, including from large OSBs, such as FanDuel.”
With $275 million in cash and no long-term debt, Genius offers investors a solid balance sheet and flexibility in terms of potential consolidation activity in the future.
