disclosure: 1000 shares and 2500 warrants
Here is the ONLY* way to play the pick and shovel side of the rapidly growing sports gambling segment: Genius Sports $GENI
edit *Competitor Sportradar is in process of traditional IPO but no date has been set. They had a failed merge with a SPAC recently most likely due to the high valuation and in my opinion the loss of the NFL contract. If the IPO is at a decent valuation this will be another good play on the picks and shovels part of sports gambling. GENI and Sportradar have a duopoly on the market.
Genius Sports is the official data, technology and commercial partner that powers the global ecosystem connecting sports, betting and media.
They are the trusted partner to over 400 sports organizations globally, capturing the highest quality data for many of the world’s largest leagues and federations such as the NFL, EPL, FIBA, NCAA, NASCAR, AFA and PGA.
Not only are they partners with the sports leagues, they are partners with the 300 of the world’s largest sportsbooks brands, and media outlets:
Sports: NFL, Premier League, NCAA, Football Data Co, FIBA, Euroleague Basketball, PGA
Betting: Bet365, Flutter, William Hill, Betway, Draftkings
Media: NFL, CBS All Access, Pizza Hut, Michigan Lottery, MLB, POINTSBET, FanDuel, BETMGM, Caesers Sportsbook, Volvo
Not only are they partnered with the NFL but $GENI won the exclusive distribution rights for NFL official data in April. They beat out their only main competitor, Sportradar. In addition to data rights, the partnership includes adjacent agreements such as video streaming rights to international (non-US) sportsbooks. $GENI will also support the NFL’s data collection and advertising capabilities while also helping monitor suspicious activity to maintain integrity.
This exclusive deal validates Genius Sports competitive position as a core cog in the global sports betting industry, where global sportsbook operators rely on data feeds distributed by $GENI
1st Quarter Earnings $GENI reported 1st quarter earnings on May 20th and raised full year 2021 revenue guidance by 35%
-Q1 revenue increased 52% year-over-year to $53.7m
-First quarter group Adj. EBITDA up 414% year-over year to $9.3m (net loss of $5.3m)
-Raised FY2021 group revenue guidance from $190m to $250m-$260m
-Announced a six-year strategic partnership with the National Football League
-Entered into a two-year marketing partnership with FanDuel to deliver data-driven, targeted advertising
-Announced the acquisitions of two leading technology companies, FanHub and Second Spectrum, diversifying our offering and enhancing capabilities
-Appointed sports industry leader and former Turner President, David Levy, as Genius Sports’ new Chairman. GROWTH
Gross Gaming Revenue expected to nearly double from $31B in 2020 to $59B by 2025 (via H2 Gambling Capital). These numbers do not include Canada who just passed a federal bill to legalize sports gambling across the country – Consider Canada as a second California for population.
$GENI looks to take advantage of this with 120% EBITDA growth CAGR from 2020-2022.
$GENI has also proven their growth over the past several years: $88m in 2018, $115m in 2019, $149.7m in 2020. As previously stated they have increased their 2021F from $190m to $250-$260m, already surpassing their 2022F of $238M.
MOAT
$GENI is the leading exclusive content and data provider for data acquisition and data monetization:
-They are the mission critical supplier to sports betting operators
-Provide exclusive, official data to sports betting operators worldwide with risk management and trading solutions
-They acquire exclusive, official rights to sports data from major leagues and federations
$GENI is one of two players (and the only publicly traded one for now) of scale providing full-service provision: # of events covered, # of sports covered, Sport League Services, One stop shop betting services, media solutions, Streaming solutions.
Their Technology and scale provide high barriers to entry:
-1500 employees across 6 continents
-450 employees in technology and trading
-7,000 statisticians and agents
-650+ long term partnerships with sports and sportsbooks
-$110m+ invested in proprietary technology
-Their technology exchange for rights means $GENI becomes fully embedded and hard to replace (150+ integrations)
-Analyze risk and manage markets, probabilities and results for 240k+ events every year
-Highly customizable software to manage every aspect of a sportsbook’s data and trading offering: outsourced sports wagering at scale
OFFICIAL DATA
$GENI has the feed of live sports statistics that is sanctioned by the sports for collection and distribution (BIG DEAL).
Why that matters:
Matters to sports – it goes to the very heart of their funding
Matters to sportsbooks – only official data gives them the security of the supply they need
Matters to regulators – protects consumers
Matters to investors – the cost of sports data is built into their model, contributing to our high barriers to entry
Anecdotal: Genius Sports is so important to Draftkings that it is listed in their risk factors
Coverage
$GENI has been covered by a handful of analysts who have all given this a buy rating with PTs in the high 20’s and low 30s:
Goldman Sachs: $31
Craig Hallum: $30
Needham & Co: $28
Benchmark: $33
Oppenheimer: $32
As of writing this, the stock is trading at $19.40. Still a huge discount to the price targets above. Part of this discount is $GENI recently had an upsized stock offering of 22 million shares. While the market reacted negatively, Oppenheimer came out and reiterated their PT of $32 as they saw this as a positive for the company to raise cash to continue to acquire companies that complement their offerings. Most recently they acquired Second Spectrum (Augmented reality and tracking technology backed by Steve Ballmer), and Fanhub (free to play games).
TLDR: $GENI is the the pick and shovel data provider to all the favorite sports betting books including $DKNG, and the only publicly traded sports betting data provider in one of the fastest growing segments in the US market. With a huge moat, Exclusive partnership with the NFL, and partnerships with hundreds of other sports leagues and sports betting books why try picking a winner when you can invest in the data provider that supplies them all?
Edit It was also brought to my attention I was lacking bear cases. The only bear case I can think of is that GENI overpaid for the NFL contract. My rebuttal is while Sportradar had it from 2015 to 2020, they were not able to take full advantage of sports gambling revenue as it was not prominent or legal in most states. This is rapidly changing and GENI has built in 5% of revenue from any sports book that uses their data. As gambling continues to grow so will Genius Sports revenue. Another element of the partnership with Genius Sports gives the company the right to distribute live audiovisual game feeds to sportsbooks in international markets, while it will also represent the NFL’s legalized sports betting advertising inventory across the league’s owned and operated digital platforms domestically and internationally.
These aspects along with great exposure for the company via the NFL and Genius Sports ability to entrench their technology into the leagues technology make this deal worth it IMO albeit the high price tag.
If you have any other bear cases that I have not thought of please comment below.
Submitted June 24, 2021 at 12:36PM by tgood87 https://ift.tt/3xSUcwr
