Investors in gaming equities haven’t had much to be thankful for as of late and the performance of Genius Sports (NYSE:GENI) stock this week proves as much.
Shares of the sports betting data provider plunged 31.56 percent in a holiday-shortened week that featured just 3.5 trading days, bringing its one-month loss to 45.57 percent. The stock, which became a standalone publicly traded entity in April, closed 61.24 percent below its 52-week high on Friday.
On Tuesday, Genius shed more than a quarter of its value after the company reported a wider-than-expected third quarter loss. While that was accompanied by strong revenue growth and a raised top line guidance for 2021, the loss sparked concerns among investors regarding when the company will boost margins and how much it’s spending to land data deals with various sports leagues.
That glum report prompted analysts to take axes to price targets on Genius Sports stock. On Wednesday, at least four analysts pared price outlooks on the stock, extending downside in the process.
Inside the Genius Price Cuts
Needham analyst Bernie McTernan trimmed his Genius price target to $22 from $29 while Craig-Hallum analyst Ryan Sigdahl lowered his forecast on the stock to $27 from $32. Benchmark analyst Mike Hickey slashed his Genius outlook to $20 from $33 while B. Riley’s David Bain lowered his estimate to $23 from $32.
Even the average of those targets, which is $23, is roughly two and half times the stock’s closing price of $9.7 on Friday. Bain points out that Genius is a long-term story and he’s not altering 2025 estimates on the name as of yet.
Our valuation continues to be driven by CY25E TAM and GENI market share/margin assumptions (EBITDA), not revenue or a discounted cash flow,” said the analyst in a note to clients. “Our CY25E estimates are largely unchanged. However, the elongated EBITDA ramp driven by GENI’s increased near-term investment to achieve CY25E assumptions highlights competitive risks showcased by Sportradar’s recent 10-year deal with the NBA, partially offset by an even larger market opportunity for GENI than we originally contemplated. We lower CY25E valuation targets to encapsulate competitive risks and new EBITDA ramp assumptions.”
A significant part of the reason Genius stock tumbled is commentary from the company regarding the substantial investments it needs to make to retain and expand market share. Big capital expenditures spooked investors, but there could be a silver lining over the long-term.
“We agree GENI’s increased investments in technology, data and streaming rights, and U.S. operational infrastructure help solidify its longer-term growth and margin expansion, and is justified by increasing customer penetration and the fast growing multi-billion online sports wagering TAM opportunity,” adds Bain.
More Support for Genius Stock
Beaten up as it is, Genius stock still has some supporters, including Cathie Wood’s ARK Investment Management, which was a steady buyer of the shares this week.
“We believe that, in the short term, as companies innovate and scale, revenue growth and product expansion are more important than operating margins,” said ARK in a note published Friday. “We also are impressed with Genius’s adtech platform and the leverage it is enjoying with the NFL’s official data. Genius Sports is a B2B technology infrastructure provider that collects, analyzes, and distributes data to sports leagues, sports betting platforms, and media partners.”
The New York-based asset manager is one of the largest institutional owners of Genius stock.