GENI Stock Forecast

GENI Stock Forecast: Genius Sports Limited is a UK-based technology company that provides live data and software solutions to the sports betting and media industries.

As consumer sports betting has grown exponentially over the last few years, the need to stream and keep track of all the data that online betting platforms rely on to calculate their odds has also become more important. 

But how do these betting companies ensure they have quick and reliable access to live scores and in-game statistics from all over the world? This is Genius Sports comes in. The company is effectively a B2B sporting ecosystem that provides all the data services and technical integrations that sports-book operators need.

Genius offers three scalable product lines to businesses:

• Sports Technology and Services;
• Betting Technology, Content and Services; and
• Media Technology, Content and Services.

And because Genius Sports is the official data aggregation firm with over 650 partnerships globally, spanning multiple sports leagues and covering 250,000 individual sporting events, the company is able to guarantee mission-critical data feeds to its clients anywhere in the world, 24 hours a day.

Are GENI Revenues Rising?

Genius Sports has only just gone public through a Special Purpose Acquisition Company (SPAC) deal, but the firm has been operating as a private enterprise for over 20 years now.

As Genius’ Co-founder and CEO Mark Locke said in the firm’s first official SEC quarterly report, 2020 was a “landmark year” for the data technology company, which, despite the headwinds from the global coronavirus pandemic, saw it entering 2021 with plenty of momentum and optimism.

Fourth quarter overall revenue grew 27.6% year-on-year to $40.7 million, with its media technology segments growing the most with new customer on-boarding from its programmatic advertising services in the US and Europe.

Total annual revenue growth was even more positive, as the company saw an increase of 30.6% year-on-year and a business-wide adjusted EBITDA of 11.7%. All segments of the company were revenue positive in 2020.

Looking forward, Genius believes its revenues could be as high as $238 million in 2022, with a potential margin of 29%. It’s expected that the sports betting market in North America will triple in 5 years, and, if the firm can scale with that expansion, it also reckons it can generate an EBITDA of somewhere close to 40% on any revenue it generates.

Is GENI Stock Undervalued?

There are two principal reasons for investors to think that Genius Sports could be undervalued. These are its solid business moat, and its unique combination of tailwinds.

GENI’s Moat

The scope and nature of Genius’ partnerships is arguably its strongest asset. The company currently has commercial relationships with 400+ sports leagues and federations, over 300 sports betting platforms, and another 300 marketing customers across the sports, betting and media sectors.

But it’s not just the quantity of these relationships that’s so impressive – it’s the quality too. Genius is the provider of data feeds to well known and well-established brands such as DraftKings Inc. (DKNG), Betfair, Skybet, FanDuel, Paddy Power, MGM Resorts, and William Hill, to name but a few.

Genius also has deals with major sporting institutions such as soccer’s FIFA, the NBA, NASCAR, PGA, and the NCAA.

And yet it isn’t even limited to just sporting governing bodies or gambling platforms either. The firm can, and does, sell its products to online publishers, sports sponsors, broadcasters, tech companies and fantasy sports outfits. When you consider the scope and reach of its cross-industry appeal, its potential addressable market is enormous.

Furthermore, Genius has just signed a blockbuster multi-year deal with the NFL to be its official data rights partner. The agreement is a cash and equity deal with options, and is expected to be worth $1 billion over the course of its 4 year contract.

Another positive feature of the company is that, so far, Genius’ average customer relationship has worked out to be around 3 to 5 years. This is pretty high to begin with and shows the stickiness of the firm’s partnerships.

However, it is likely that as the online betting industry becomes more mature and Genius further consolidates it place in the market, these numbers will rise, making the company’s moat even more impenetrable, and the barrier to entry of its competitors much higher.

Tailwinds

Secular and industry-specific tailwinds driving the adoption of online gambling are all in Genius’ favor right now.

Through regulatory change and a shift in common attitudes, sports betting is becoming more and more accessible to customers in the US – and the money being spent on global sports betting is also rising.

Add to that the consumer habits picked up during the COVID-19 crisis – an increased move to internet-based recreation activities and purchases – and it’s not too hard to see how all this benefits betting-adjacent businesses like GENI.

On top of that, the marketplace for online gambling is becoming more efficient and easier to access. Micro-betting is all the rage now, and Google has reintroduced gambling apps back into its Play Store. Payment processors too are increasingly integrating with gaming and betting firms, with companies like NETELLER, Trustly and Skrill getting into the action. 

Risks To Buying GENI Stock

Genius doesn’t have it all its own way when it comes to the world of sports betting data – and, although it does command a large 40% of the market, the company has stated in its own prospectus filing that its main rival, Sportradar, probably accounts for the majority of what remains of the potential revenues in the space.

However, Sportradar and other competitors, such as Stats Perform and IGMArena, are not yet publicly traded companies, and the first mover advantage afforded to Genius in this regard is not to be discounted.

That said, Sportradar does has ambitions to launch its own IPO at some point in the future, and the potential effects of this on GENI’s position remain to be seen.

Is GENI Stock Price Forecast To Rise?

Given Genius Sports’ admirable industry partnerships and its growing business operations, the firm should likely justify higher than average trading multiples. But because the company has only been listed on the NYSE for less than a month, it’s difficult to make too fine of a diagnosis of its financial health just yet.

However, Genius has grown its revenues for 5 years straight now, and its guaranteed cash sales from fixed income payments – and the low churn it sees among clients – is a good sign.

The company also has myriad growth opportunities in the coming 12 months – among them a barely untapped streaming market, and the customer acquisition potentials from newly regulated North America markets.

Investors should therefore expect Genius Sports stock to rise with, or even faster than, the expanding sports betting market as a whole.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.