Sportradar Stock Supported by Margin Expansion, Growth Outlets
Posted on: June 5, 2025, 04:24h.
Last updated on: June 5, 2025, 04:24h.
- Sports betting data provider expected to significantly boost EBTIDA margins
- Could realize new growth opportunities via IMG Arena deal, iGaming
Sportradar (NASDAQ: SRAD) could be a compelling long-term bet among gaming stocks as the sports betting data provider realizes new top-line growth drivers and as earnings margins expand.
In a new report to clients, Jefferies analyst David Katz said he recently met with senior management from the Swiss company and those executives appeared confident the company can increase revenue at a 15% compound annual growth rate (CAGR) from 2024 through 2027. Sportradar could also significantly expand its earnings before interest, taxes, depreciation, and amortization (EBITDA) margins.
The company continues to expect 200 basis points (bps) of adjusted EBITDA margin expansion in FY25, with an additional 500bps between FY26 and FY27,” notes Katz. “SRAD noted that a key to margin expansion is top-line growth, as the company’s cost structure is fairly sticky given major sports rights are secured through 2029, and the incremental margins on new revenue are highly accretive.”
Having a lengthy window in which it doesn’t have to renew deals with leagues is favorable to Sportradar because those rights deals are expensive and the tech provider has previously forked over equity to win those contracts. Katz said those costs are likely to increase by high single-digit percentages over the next few years, or well below Sportradar’s expected rate of sale growth. The analyst rates the stock a “buy” with a $27 price target, which implies upside of about 13% from today’s close.
Sportradar Stock Could Get IMG Arena Lift
In March, Sportradar announced the acquisition of IMG Arena and its sports wagering assets from Endeavor Group Holdings in what is arguably the definition of a sweetheart deal. Under the terms of the deal, Sportradar lands a consideration of $125 million with Endeavor pledging $100 million in cash prepayments “to certain of the sports rightsholders.”
Translation: Sportradar is paying nothing for an asset that could contribute to long-term growth. Katz said executives from the company believe IMG Arena buy could be additive to margins and that Sportradar’s scale could prove effective in better leveraging the sports rights currently held by IMG Arena.
“We estimate that the deal could represent as much as ~€130M in incremental revenue and ~€30M in incremental adjusted EBITDA, or a high single-digit improvement vs. our current FY26 estimates in addition to the $125M in proceeds paid from the seller,” wrote the analyst.
The acquisition is expected to close in the fourth quarter, pending regulatory approval in the UK.
Sportradar Restrained Regarding Capital Spending
When it comes to capital spending, Sportradar wants to take a prudent approach with Katz noting the bar is likely when it comes to mergers and acquisitions considerations.
“SRAD was clear that its primary focus is growth of the business, both organic and inorganic with strict criteria for M&A given the company’s current margin profile,” observes the analyst. “Our impression is incremental deals would need to be margin accretive to SRAD, with the most likely targets being additional sports rights contracts, or unique technologies to further improve its product offering.”
Regarding the possibility of shareholder rewards, Sportradar could be an “opportunistic” buyer of its own shares, which are up 37.25% year-to-date, making it one of the best-performing gaming stocks.
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