Is Sportradar Stock A Good Buy?

Sportradar Group AG (NASDAQ:SRAD) is a Swiss sports data provider that went public via a September 2021 IPO. The company was backed in its early days by Technology Crossover Ventures, a growth equity firm draped in success having backed major winners like Netflix (NFLX) in the early days. As Netflix won the streaming wars will Sportradar win the sports data wars? In other words, is Sportradar the best sport stock to buy?

The company is an official partner of major sports leagues like the NBA and NASCAR and has over 1,600 customers, including DraftKings (NASDAQ:DKNG) and Twitter (NYSE:TWTR).

It’s the official sports data feed for many of the most popular bookmakers and media companies. That data is critical to betting odds, casinos profit and loss statements and the bottom line of bookies.

Moreover, Sportradar is involved in broadcast and OTT services that reach fans directly. This makes it a potential powerhouse in the media and data industries, especially as more services move toward integrating live sports.

Sports Data and Moneyball

Data is important in every industry, and the sports industry is no exception. The book and film Moneyball about the Oakland Athletics 2002 season provides a glimpse into a whole new way to look at sports data analytics. General Manager Billy Beane recruited data analysts to build a team based on a long-term strategy that was often overlooked by his peers.

Data is not confined to measuring stats of wins and losses. Professional teams are tapping deeper into our own bodies’ data. NFL prospects had smart data tracking implemented into the clothing worn at the NFL Combine.

Every professional sporting league is using innovative technology and data to assess their teams, and this is the foundation of what’s making sports betting so appealing these days. Fans have more information on hand faster to make more intuitive betting decisions.

It helps that sports gambling legalization is on an upward trajectory. And Sportradar has over 8,000 data journalists covering over 750,000 events every year.

Legalization of Sports Betting

The widespread legalization of sports betting follows a May 2018 Supreme Court ruling in Murphy v National Collegiate Athletic Assn. Although it didn’t specifically legalize sports betting in the U.S., it did make clear that state law has the right to determine whether its respective citizens can participate.

This ruling sparked a domino effect of states reexamining their laws with a new perspective on their power to enforce them. Over the next three years, 28 states and Washington, D.C. legalized sports betting.

A new market emerged that contributed to the nearly-$220 billion sports betting and lottery market. Sportradar is a major player in this market, providing statistics for some of the biggest leagues and outlets in the country.

Sportradar Partners and Competitors

Sportradar has partnerships in place with media, tech, and sports companies. Its league partnerships include Major League Baseball, the National Basketball Association, National Hockey Association, NASCAR, International Tennis Federation, and international soccer with a total of 83 sports represented in its odds data.

This requires a plethora of analytics and recalculations throughout the games on data collected through its data licenses. It also has partnerships with over 300 bookmakers, like Bet365, DraftKings, Ladbrokes, Paddy Power, and William Hill, along with stations like ESPN and even out-of-home ad network Adomni.

It might come as a surprise to learn that the company also has partnerships with Europol and the Australian Federal Police. This helps the agencies identify and prosecute possible match fixing and other criminal activity affecting professional sports.

Still, it has major competition in Genius Sports (GENI), which is a smaller company with a growing presence and major partnerships too.

Sportradar’s Financial Outlook

Sportradar’s SEC prospectus showed it earned net profits of $17.4 million from a smidge under $470 million in top line revenues over the past year. The firm’s combination of media and betting products have created a powerful force to monetize sports fans and bettors.

SRAD has long-term deals with clients; its NHL partnership is a 10-year global contract, and FanDuel’s contract lasts through 2028. That provides investors with compelling reasons to believe it will maintain predictable revenues, a solid foundation upon which to grow.

The sports betting market is expected to grow to $179.3 billion by 2026 from $131.1 billion last year. As the market leader in the backend software and data, Sportradar stands to make sizeable gains yearly, regardless of the outcomes of the individual sporting events or platforms.

A boom in sport betting apps makes it more accessible to bettors, and integrations between media, fantasy sports, and gambling create symmetry to maximize potential gains for all stakeholders.

However, there are still plenty of risks involved given the exposure to the vice industry.

Sportradar Risk Factors

While it may be legal in more than half of the United States, gambling is still considered a vice, like alcohol, smoking, and pornography.

All of this is legal, but it’s not necessarily advertiser friendly, as local laws vary widely. The only consistency in vice industries is they all have to follow strict regulations to maintain compliance.

This could limit the long-term growth potential of the market, and Genius Sports or other competitors could gain traction. Regulator risks facing the industry on a global and local level make sports betting a risky investment, regardless of the individual investment.

Is Sportradar Group Stock A Buy: The Bottom Line

Sportradar has a unique value position that creates a powerful moat. The barrier to entry in sports data is high, and the company is embedded deeply upstream in the supply chain with long-term contracts. This makes it the larger of two vital tools at the foundation of the industry.

It has relatively secure revenue streams in a growing industry. As long as people are interested in sports, Sportradar should have a secular growth trend for years to come. Its primary threat right now stems from competition: Genius Sports in particular.

Still, if you want to win in sports regardless of who wins, Sportradar is as close to a sure-thing as you can find.

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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.