Genius Sports Has Runway for Growth, Says Analyst

Coming off solid fourth-quarter results, one analyst says Genius Sports (NYSE: GENI) could have multiple growth tailwinds this year and the potential to generate free cash flow.

While the stock slid 5.84% Thursday after the sports betting data provider said fourth-quarter revenue and earnings before interest, taxes, depreciation, and amortization (EBITDA) beat consensus forecasts by 1% and 7%, respectively, some analysts remain constructive on the name.

Although a +24% YoY increase in data rights may have taken the Street by surprise given its fixed but non-linear nature, 4Q s NFL trends/data as it relates to hold, live betting and streaming are arguably trending above expectations, setting the stage for a ramp up and upside to estimates in 2H24, GENI s seasonally strong period,” wrote Macquarie analyst Chad Beynon in a note to clients.

Benyon rates Genius “outperform” , implying upside of 74.8% from Thursday’s close at $6.29.

In-game wagering or live betting is increasingly popular among U.S. bettors, and that creates new technological demands for sportsbook operators that want to capitalize on that profitable trend.

That’s positive for Genius Sports and rival Sportradar (NASDAQ: SRAD), which operate as a de facto duopoly for the sports betting data market. Some analysts believe both companies could benefit from bettors’ increasing preference for over pregame investments.

“We see continued momentum for GENI coming from legalization/hold, but also a faster transition to more live betting, spurred by continued innovation from new products like BetVision,” added Beynon.

Benyon observed that last year, in-game betting represented about 20% of the gross gaming revenue (GGR) realized on NFL games. Profit margins on those bets surged 400 basis points in just two years. In what could be a long-term positive for Genius, there’s massive room for growth in live betting, because in mature markets outside the U.S., in-game bets account for up to 80% (or more) of GGR.

Genius is arguably a catalyst-rich story, thanks to factors including margin expansion, in-game wagering, internal growth, and the possibility of mergers and acquisitions, according to Beynon. He didn’t say if the gaming technology company would be a buyer or seller if industry consolidation perks up.

Increased legalization of across the U.S. and the status of Genius as a deeply discounted stock could also be creators of upside for the shares.

“GENI is positioned to outpace the overall market, unlocking significant operating leverage in the process. Despite our estimated 3-year (2023E-26E) revenue/EBITDA compound annual growth rates of 16%/48%, GENI trades at a significant discount to other growth peers,” concluded Beynon.