Genius Sports Tagged with Outperform Rating at Macquarie

Posted on: December 21, 2023, 04:42h. 

Last updated on: December 26, 2023, 11:45h.

Sports betting data provider Genius Sports (NYSE: GENI) closed modestly higher Thursday on above-average volume after the stock earned some sell-side praise.

A slide from a Genius Sports investor presentation. The stock earned an “outperform” rating from Macquarie on Thursday. (Image: Genius Sports)

In a new report to clients, Macquarie analyst Chad Beynon initiated coverage of the stock with an “outperform” rating and a price target of $11, implying upside of 77.4% from Thursday’s close at $6.20. The analyst believes Genius Sports “sits at the tech epicenter of a powerful NFL rising tide.”

We think Genius Sports has been and will continue to be a critical driver of sports fan engagement and values for sports leagues/teams, which have doubled in the past five years,” wrote Beynon. “As a result of the importance of GENI’s player stats, artificial intelligence (AI) data and the ability to bring this to life, we believe GENI shares can also 2x in value over the next 1-2 years.”

Somewhat quietly, Genius has been one of this year’s best-performing sports wagering equities, as highlighted by a 73.67% gain. That includes a 16.32% pop over the past month.

Genius Sports Essential

The data and technology provided by Genius are crucial in advancing the domestic sports wagering industry, and essential at a time when more operators are leveraging exotic wagers to entice clients.

Some analysts have described Genius as a “picks and shovels player” that markets live betting data and “other sticky services” to global sportsbook operators, including Bet365 and DraftKings (NASDAQ: DKNG). Some analysts believe the stock could benefit from bettors’ increasing preference for in-game or live wagers over pregame investments.

Amid the expected growth of the North American online sports betting (OSB) market, and helped by its relationship with the NFL, Genius Sports could be a long-term winner among sports wagering equities.

“We expect the North America OSB market to grow at a CAGR of 24% through 2026E reaching $22bn in gross gaming revenue (GGR). We think GENI can grow its North American revs at a faster clip on increased event utilization, new products, and growing in-game betting. In 2021, GENI became the exclusive distributor of NFL official data, which is key for betting revs, but should yield further advertising upside,” added Beynon.

Bettors’ Habits, Predictable Revenue Helping Genius

Sportsbook operators, many of whom are Genius clients, are increasingly enticing clients with in-game bets and same-game parlays. Those long odds, high-hold wagers require technology, and Genius has it.

As a result of bettors’ increasing penchant for lottery ticket-style wagers and other factors, Genius has one of the more predictable revenue streams in the gaming industry, a space usually not known for predictability.

“Given the predictable nature of GENI’s business, we see a clear line of path to free cash flow of $70 million-plus in 2025E and $120 million-plus in 2026E, with significant upside coming from a faster shift to NFL in-play betting and incremental advertising revs driven by swift adoption of new products like BetVision,” concluded Beynon.