Sports gambling stocks have been hammered recently often tied to the thought that promotions and deals with states won't ultimately lead to enough profitability. The more surprising laggard in the industry is Genius Sports, the sports betting data provider who gets licensing fees on bets at books where their information is used.
One would think that if someone wanted to invest on betting without having to worry about the acquisition costs of sportsbooks that Genius would be a play, especially as live betting — for which they take a greater cut — grows.
But the stock has been absolutely obliterated this year, down 66% in the last six months alone and investors haven't listened to analyst calls saying the stock is supposedly undervalued. Eight analysts currently say Genius Sports is a buy with one saying it's a hold and none calling it a sell. And despite an average price target of $15.89, Genius sits at less than $6 a share, as of Friday.
On Jan. 19, Credit Suisse analyst Ben Chaikin gave Genius Sports a boost, saying, "We view GENI as an attractive way to gain leverage to the growth of global gaming revenue as well as the proliferation of in-game betting, which should drive upside to the numbers," he said.
But the bump was only temporary.
In an investor call this week, Genius Sports executives took an unprecedented step, at least for a public company, of stating goals for two years of revenue, saying it will be on track for profitability this year ($340M in revenue, $15M in EBITDA) and will triple EBITDA to $45 million in 2023. The outlook wasn't enough to get the stock out of the dump.
One of the ways this will happen, company executives say, is because the company gets 1.5% of each pregame bet from sportsbooks who license their data, but gets 5% of in-play bets. In-play wagering will likely be the more preferred bet for Americans, as in Europe its about 75% of all betting and American sports are easier to live bet than soccer.
Last year, Genius Sports gave a reported 5% of its company away to wrangle the NFL data deal from its competitor SportRadar, who said the rights fees being asked were five times bigger than their previous deal. It was seen as a smart play by Genius to be able to get rights to the top U.S. league, as official betting providers of the league have to use the Genius data. Genius also has an official deal with the PGA Tour, NASCAR and the NCAA.
