Genius Sports Named Best Small-Cap Betting Idea by Oppenheimer
It's easy to overlook Genius Sports (NYSE: GENI ) during a months-long downturn that saw the stock lose 24.18% and head into a bear market, but at least one analyst thinks investors should consider other perspectives.
In a new client note, Oppenheimer analyst Jed Kelly called Genius the "best small-cap play" in the emerging domestic sports betting industry. Small-cap stocks are generally considered to be stocks with a market capitalization of $2 billion or less. With a market capitalization of $1.15 billion as of today's close, Genius is well positioned to meet those needs.
One of Genius's advantages, Kelly said, is that as a pick-and-shovel player in the sports betting space, the company isn't affected by the pressures largely owned by Flutter Entertainment (NYSE: FLUT ) FanDuel and DraftKings (NASDAQ: DKNG ) driven by market share trends. will be dominated). That said, as a data provider, Genius isn't exposed to the consumer-facing side of the industry, meaning it isn't affected by the aforementioned duopoly or negative trends in consumer spending.
Instead, Genius provides essential services and technology for operators. In fact, it's arguably part of a duopoly of its own, as it and rival Sportradar (NASDAQ: SRAD ) dominate the sports betting data market.
Genius Sports loses lead
As Oppenheimer's Kelly noted, another catalyst for Genius Sports was the removal of a drag on the stock after Apax Partners reduced its stake in the company by about 10% to 21.3 million shares.
Genius told investors on Monday that Apax partner Gabriele Cipparrone will resign from the data provider on April 8 following a stock sale. Kelly said the Apax deal could remove sponsor interference, increase liquidity in Genius stock and force investors to take another look at the company's attractive fundamentals.
Genius CEO Mark Locke said in a statement: "As a public company, we have worked extremely hard over the past three years to build an exceptional team of public equity investors that we are proud to call shareholders of Genius Sports." "With the continued liquidity of our stock, we look forward to continuing to attract and retain the prudent long-term shareholders we are honored to call our partners today."
Genius said it is conducting a "comprehensive search" to identify qualified board members to replace those previously identified as representatives of Apax Partners.
Other Catalysts for Genius Sports
Genius previously told investors it expected 2024 revenue of $480 million and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $75 million. Free cash flow is also expected to be positive this year.
The company could also break even on earnings per share (EPS) in 2025 and then become profitable on that metric the following year.
9 of the 10 analysts covering the stock rate the stock as a Strong Buy or Buy, with a consensus price target of $9.15, implying a $5,52 upside from today’s closing price. The US dollar rose 65.76%.
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