On December 21, 2023, sports betting data provider Genius Sports (NYSE: GENI) saw its stock price close higher than usual, following a report from Macquarie analyst Chad Beynon. In the report, Beynon initiated coverage of the stock with an “outperform” rating and a price target of $11, indicating a potential upside of 77.4% from the previous day’s closing price of $6.20.
The analyst highlighted the importance of Genius Sports in driving sports fan engagement and values for sports leagues and teams, particularly in the context of its role at the intersection of technology and the National Football League (NFL). Beynon stated that the company’s player stats, artificial intelligence (AI) data, and their ability to bring this information to life could contribute to a doubling in the value of Genius Sports shares over the next 1-2 years.
Despite relatively quiet performance, Genius Sports has been one of the year’s top-performing sports wagering equities, with a 73.67% gain, including a 16.32% increase over the past month.
The company’s data and technology are considered crucial to the advancement of the domestic sports wagering industry, particularly as more operators leverage exotic wagers to attract clients. Analysts have highlighted Genius Sports as a “picks and shovels player,” marketing live betting data and other services to global sportsbook operators, including Bet365 and DraftKings (NASDAQ: DKNG). The company’s role in providing technology for in-game or live wagers, as well as its relationship with the NFL, positions it as a potential long-term winner in the sports wagering market, particularly as the North American online sports betting market is expected to grow at a compound annual growth rate (CAGR) of 24% through 2026.
Beynon emphasized the potential for Genius Sports to grow its North American revenues, driven by increased event utilization, new products, and growing in-game betting. The company’s exclusive distributorship of NFL official data in 2021 is also seen as key for betting revenues and potential advertising upside.
Genius Sports’ ability to cater to bettors’ changing habits, particularly their increasing preference for in-game bets and same-game parlays, is seen as a strategic advantage. The company’s technology positions it well to capitalize on the growing popularity of these types of wagers, contributing to a more predictable revenue stream in the gaming industry, traditionally known for its unpredictability.
In conclusion, Beynon stated that due to the predictable nature of Genius Sports’ business, the company has a clear path to significant free cash flow in the coming years, with the potential for additional upside resulting from a faster shift to NFL in-play betting and advertising revenues from new products and partnerships.