Genius Sports Ltd. [NYSE: GENI] is a sports data and technology company that enables scalable, technology-led products and services to the sports, sports betting, and sports media industries.
This technology enables sports leagues and federations around the globe to better capture, manage and distribute their data for enhancing their relationships with fans.
Its services include:
- Sports League, which offers technology infrastructure for the collection, integration, and distribution of live data, streaming solutions, end-to-end integrity services:
- Sportsbooks, which includes collection of live sports data, risk management services, including customer profiling, monitoring of incoming bets, automated acceptance and rejection of bets, management and player marketing: and
- Sports Media, which provides a range of online marketing and fan engagement tools for digital publishers that offer live game statistics and betting-related content.
The Bull Case for Genius Sports
Genius Sports is one of the world’s largest sports technology companies. It provides digital sports content, technology and integrity services to sports leagues and organizations.
Genius is increasingly making its presence felt in the rapidly growing sports betting market, though not as a sportsbook but, rather, as a data management and services provider connecting sports, betting and media companies.
It has been three years since the U.S. Supreme Court legalized sports betting in the U.S., leading to a huge interest in sports and betting in the country. This shifted investors’ attention towards sports data companies as a good investment opportunity.
In March alone, somewhere around $4 billion was bet on sporting events with U.S. sportsbooks. The sports betting market is a huge growth opportunity with reports suggesting that online betting could become a $22 billion market in the next few years, whereas the overall U.S. sports betting market could be worth $40 billion in the next decade or so.
The huge size of the market is expected to generate a lot of winners along the way, with Genius Sports looking particularly poised to take advantage of the huge market opportunity.
Genius Sports is new to the public markets, having become a publicly listed company through a SPAC merger with dMY Technology Group in April 2021.
The company possesses quite a few unique qualities that investors ought to note. The firm reported strong growth in 2020, with revenue rising 31% to $150 million. One of the most attractive aspects of Genius is that a lot of its growth is organic, and this approach is significantly different from its main rival Sportradar that has generally taken the acquisition route to fuel its considerably lower level of growth.
The ever-expanding sports betting market in the U.S. offers tremendous growth prospects for the company. Last year, almost 74% of Genius Sports’ revenue came from sportsbooks that use the data to offer competitive in-play betting markets.
With expectations that in-play betting will account for up to 75% of all sports bets in the U.S. by 2024, there’s no dearth of reasons for sportsbooks to pay attention to receiving the best available data to control and maximize the value of their content.
Genius Partnership With NFL Is Huge
Genius signed a four-year deal with the National Football League in April, which gives GENI exclusive distribution rights for the NFL’s official data. The deal also allows GENI to support the NFL’s data collection and advertising capabilities while also helping monitor suspicious activity to maintain integrity.
Before that, it signed a deal with Major League Baseball to join the roster of feeds offering the league’s data to sportsbooks.
Genius also has agreements with many other significant sports bodies like the English Premier League, PGA Tour, NASCAR, and the NCAA, along with a number of sportsbooks, including Fanduel, Caesars Entertainment’s William Hill, and MGM Resorts BetMGM.
Another attractive aspect of Genius Sports is that it has a number of different revenue streams, with CEO Mark Locke telling investors: “Our strategy of powering the global sports data ecosystem has supported our growth in the quarter, and we’re confident in our ability to continuously improve our end-to-end solution and deliver on our increased guidance for the year.” The company generated revenue of $53.74 million for the quarter, compared to the consensus estimate of $44 million.
Genius Sports Limited also recently announced a new supplier agreement with DraftKings Inc (DKNG), a leading sports betting and gaming operator in the U.S.
Under the agreement, Genius Sports will provide DraftKings with its “full range of official sportsbook data and content and fan engagement solutions, including a complete suite of NFL-related products.”
Genius Sports also recently acquired Spirable, a creative performance platform, which allows brands, agencies and rights holders to create, automate and optimize highly personalized content.
Is Genius Sports Stock A Buy?
As a global sports data company that develops and sells technology-led products and services to the sports, sports betting, and sports media industries, Genius is uniquely poised to leverage the worldwide opportunity sports betting provides.
A very important point to note here is that sports betting is not solely confined to the U.S. It is a worldwide phenomenon and Genius Sports, as a global company, stands to hugely benefit from its rapidly growing popularity. This, in turn, could provide investors with a world of opportunity to profit.
The Bear Case for Genius Sports
Deregulation of sports betting is taking off at a fast pace across the globe, but there are still worries that it could take years for countries around the world to fully deregulate sports betting, particularly online sport betting versus retail.
Then, there’s also the likelihood of deregulating online betting, though on unfavorable terms, which could make it more difficult for companies like Genius to increase their presence in growing markets.
Unfavorable regulations also enhance the risks of illegally operating companies flourishing at the expense of regulated operators.
Rising data rights costs
Exclusivity of events bestows sports leagues with pricing control over data rights.
Major sports leagues, as such, possess the power to increase data fees for sportsbooks which, in turn, could impact GENI’s margins if it is unable to pass higher costs through to customers.
Increasing regulations related to gambling
After years of fast expansion, European markets are now being compelled to deal with a new wave of re-regulation, as Governments seek to control habitual gambling. This translates into higher taxes and greater restrictions on advertising.
It is feared that such restrictions may be imposed into less mature markets, such as the United States, over time.
Online sports betting may wane post Covid
Stay-at-home orders during the pandemic shifted the momentum towards online sports betting. However, as the pandemic abates and the economy re-opens, consumers may feel more inclined to return to traditional gaming and other entertainment alternatives, instead of online betting.
Expensive NFL Deal
Some experts are apprehensive that Genius Sports has gone overboard with the NFL deal.
In order to make up for the $120 million annual data fees for the total tenure of the partnership, Genius Sports has no option but to pass on the additional costs to its partners.
With sportsbooks operating off slim margins already, it could be problematic for them to cope up with increased fees for NFL betting data.
Is GENI A Smart Long-term Play?
Every investment comes with risk, but Genius Sports Group is worth keeping an eye on, thanks to multiple tailwinds, including relaxing of regulations in the US sports betting industry, the rise of big data, and its exclusive deal with the NFL, worth $120 million.
Genius has some favorable qualities and the valuation is reasonable. The share price is also not as volatile as most betting stocks. While explosive growth might not be on the horizon, Genius could turn out to be a steady grower, and the one to hold for the long haul.
GENI Stock Price Forecast
12-month price forecasts for Genius Sports Ltd range from a low of $28.00 to a high of $33.00.
On average, it is anticipated that Genius Sports’ stock price could reach $30.50 in the next year.
This represents a possible upside of nearly 77% from the stock’s current price.
Is Genius Sports Stock A Buy?
Genius Sports is the official data, technology and commercial partner that develops and sells technology-led products and services to the sports, sports betting, and sports media industries.
Sports companies use Genius data to analyze matches and improve team performance.
Betting platforms use Genius to price their sportsbooks to deliver competitive in-play betting.
Media companies use Genius data to enhance their engagement with their customers. They also use the data to run ads and sell tickets.
The company is a core cog in the global online sports betting industry where global sportsbook operators rely on data feeds distributed by GENI. Globally, sports betting generated around $30 billion in revenue in 2020.
As of March last year, the company boasted:
- Commercial relationships with 400+ sports leagues and federations, 300+ sportsbook brands and 100+ marketing customers
- 1,500 employees across 6 continents $110M invested in proprietary technology and software solutions that sports, sportsbooks and media partners depend on
- Around 60% of recurring revenue related to contractual minimums, providing good visibility into future revenue growth
Genius Sports signed an exclusive partnership with the NFL in April. This deal is worth $120 million annually for six years.
On August 5, Genius Sports announced a new supplier agreement with DraftKings (DKNG) for providing its full range of official sportsbook data and content and fan engagement solutions, including a complete suite of NFL-related products.
Sector Growth Of 33% Annually Forecast
Sports betting is undoubtedly the most lucrative source of revenue for Genius. With the loosening of gambling regulations, the burgeoning sports betting market in the U.S. is a rewarding space for the company.
The sports betting revenue in USA is expected to grow around 33% per year to reach $8 billion by 2025. This figure can go much higher if more states decide to legalize gambling operations.
This is a distinct probability as many states, reeling from the economic effects of the pandemic, may legalize betting in order to generate additional revenue.
Total Addressable Market (TAM) CAGR 43%
Data suggests that the total addressable market for sports analytics should grow at a CAGR of 43.5% to reach $4.5 billion by 2024.
Global sports betting revenue is expected to reach around $60 billion alongside the expansion of new markets such as the United States, thus significantly increasing GENI’s market opportunity for sportsbook data fees.
In the long term, GENI believes it can achieve a 30% to 50% share of its 2025 addressable market which implies $900 million to $1.5 billion revenues for the company.
Another huge positive for the company was that it could grow revenue by more than 25% despite the cancellation of numerous sporting events due to the pandemic.
Competition Is Limited
There are two main players in this market, Genius and Sports Radar. This makes it a kind of duopoly, with experts believing that it would be extremely difficult for new entrants to replace these two behemoths in the sports betting value chain.
Sports Radar is also in the process of going public which, in turn, is a good thing for Genius since it would raise the profile of both companies.
Sports betting is also an addictive product, which means the demand for Genius’ data is unlikely to suffer a decline in near or long term.
International Expansion A Big Opportunity
Genius is still a small company with tremendous growth potential. The online sports betting industry remains a nascent market, with huge growth potential as countries around the world make online wagering legal in order to levy taxes on revenues. Key growth markets include the United States, parts of Europe, South America and Asia.
Genius is uniquely placed with a niche service as it possesses the technology to cost effectively acquire data and efficiently disseminate it to sportsbook customers.
GENI operates in a near duopoly, and has a number of different revenue streams. It also appears to be well positioned in the U.S. betting market with its exclusive NFL deal.
The company is attractively valued, and with anticipated revenue growth of 26% CAGR from 2020 to 2025, Genius is strongly positioned to outperform the market over the next ten years.
Genius Sports Investment Thesis Conclusion
Genius Sports is a vital player in the global sports betting industry, serving as a straw that stirs the drink, mixing data and media with sportsbooks. In other words, Genius aggregates and distributes official sports data to online sportsbook operators, sports leagues and media companies for fixed and variable fees.
Sports betting industry is taking off in a big way in the United States, and companies like Genius are nicely positioned to capitalize on this phenomenon. Online betting itself could become a $22 billion market in the next few years, and it is expected that U.S. sports betting overall will be a $40 billion market by 2033.
More and more states are voting to legalize sports betting seemingly every month and, as the world comes out of the pandemic, live sports could experience a period of renewed growth. This could drive more demand for sports betting and offer a strong bull case for stocks of companies like Genius.
The company reported a strong quarter, with revenues jumping across all its segments. Betting-technology revenue jumped 42% in the quarter to $39 million, sports-technology revenue surged 42% to $5.4 million, and media technology rocketed a whopping 127% to $9.4 million as it acquired new customers in the Americas and Europe.
Genius Sports now expects full-year revenue to rise $250 million to $260 million, up from $190 million at the mid-range of its previous guidance. Genius believes it can achieve a 30% to 50% share of its 2025 addressable market which implies $900 million to $1.5 billion revenues in the longer term.
Its landmark NFL deal increases both market share and TAM while validating Genius Sports’ competitive position. The company is also focused on expanding in emerging markets and is present in over 150 countries.
There are also certain risks which investors should be aware of to make a better investing decision. For example, the company’s credibility can suffer a damage if it is unable to delivery data quickly enough or if it delivers data containing errors. Also, increasing gambling regulations around the world could negatively impact the demand for the company’s services.
However, despite the presence of a few risks, Genius stands in front of multiple tailwinds, thanks to the legalization of sports betting in the US, resumption of live sports and its ability to cost effectively acquire data and efficiently disseminate it to sportsbook customers. Another item to note is the fact that many of the top sports betting stocks have been underperformers thus far in 2021, thus providing investors the opportunity to grab the shares while they are off of their highs.
All in all, total global revenue generated by online sports betting was in the range of approx. $30 billion in 2020, and it is expected to grow rapidly as new markets deregulate and mature. It is an opportunity expected to generate handsome returns for GENI. The company seems to have a bright future as more investors appreciate GENI’s niche position in the global sports betting value chain.
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.