Genius Sports Stock Could Get NFL Lift, Says Analyst

Posted on: September 19, 2022, 09:46h. 

Last updated on: September 19, 2022, 02:10h.

The 2022 NFL season is in full bloom, and Wall Street expects that to be a catalyst for sportsbook equities. Football could also bring needed relief for technology and data providers, such as Genius Sports (NYSE: GENI).

Genius Sports
An example of in-game analytics from Genius Sports. An analyst says the stock could benefit from the rise of live NFL betting. (Image: Genius Sports)

Shares of the sports betting data provider are off 39.47% year-to-date. But underscoring the stock’s sensitivity to the arrival of football season, the shares are up 93.28% in the current quarter.

B. Riley analyst David Bain reiterates a “buy” rating and an $8 price target on Genius, implying the stock can appreciate almost 74% from its September 16 close.

Bain says Genius is poised to benefit from bettors’ increasing preference for in-game or live wagers over pregame investments. He notes that by 2027, Genius could accrue approximately $131 million in recurring NFL-specific earnings before interest, taxes, depreciation, and amortization (EBITDA) from live betting.

This segmented EBITDA does not include similar growth and mix shift benefits to GENI from any other domestic or international sport, including NFL international,” wrote the analyst. “It also excludes financial benefits from its NFL betting offering (or otherwise) to its media or technology businesses.”

In 2021, Genius inked a four-year pact reportedly worth $1 billion to become the football league’s exclusive data provider.

NFL Deal Could Pay Off for Genius Stock

When Genius announced the aforementioned accord with the NFL, market observers questioned the viability of such agreements, noting the company and rival Sportradar (NASDAQ: SRAD) may be giving up too much simply to be a particular league’s data provider.

Indeed, Genius gave up a significant portion of its equity to the NFL to gain those rights. The league was granted 22.5 million Genius warrants as part of the data accord. Should the NFL eventually exercise all of its Genius warrants, it would become the largest holder of the stock outside of the company itself.

However, the relationship with the NFL is paying dividends for Genius. That’s due in large part to the in-game betting boom.

“Given multiple sources citing a strong start to NFL OSB wagering, GENI’s exclusive NFL data rights deal, its EBITDA-positive B2B platform, and a likely accelerated market mix shift to in-play betting, we reiterate our Buy rating on shares,” added Bain.

Through two weeks of NFL action and three weeks of college football, online sportsbook operators tell analysts that bettors’ attention is shifting to in-game wagers and same-game parlays. Those wagers are more profitable for the books and beneficial to firms such as Genius because they highlight the need for top-tier data.

Prime Example of In-Game Betting Catalyst

One of the marquee examples of the potency of the new style of sports betting is DraftKings (NASDAQ: DKNG), which recently became the official partner of Amazon’s (NASDAQ: AMZN) Thursday Night Football broadcast.

That’s seen as a potential boon for the gaming company’s same-game parlays offering. In turn, Genius could benefit, too.

Last week, “GENI disclosed an agreement to provide augmented technology and data-related services to Amazon Primes’ Thursday Night NFL broadcast in the US. ” GENI will provide technology to increase fan engagement through real-time tracking/analytics, data visualization trackers, and other technologies,” concluded Bain.

“GENI not only gets paid directly for providing these services, but such broadcast offerings should also funnel back to accelerate the overall betting handle and handle mix to in-play, in our view, benefiting GENI’s betting platform.”