Sportradar: 4 Reasons Shares Could Be A Good Bet In 2024

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Sportradar's Q4 results were highlighted by strong margins and earnings momentum.The company announced a large share repurchasing authorization, which should be supportive of the stock price.We are ...

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Riska Sportradar Group AG (NASDAQ:SRAD) capped off 2023 with record earnings, confirming the company's position as the global leader in sports analytics. On the other hand, that momentum hasn't quite translated to a strong stock price performance, with shares currently down 30% from their 52-week highs. We believe the recent weakness offers a compelling buying opportunity for this high-quality stock with a positive long-term outlook. The following 4 factors highlight why we rate SRAD as a buy.  Solid growth with climbing profitability. Tailwinds for the online sports betting market The company is set to launch a major share-repurchasing program SRAD appears undervalued relative to competitor Genius Sports Ltd. (GENI)  Data by YCharts SRAD Financials Recap SRAD reported its Q4 results back in March with the headline revenue of EUR 253 million, up 22% year-over-year. Total profit from continuing operations of EUR 23 million reversed a loss of EUR -33 million in the prior year quarter. Each of the company's three core segments posted growth, driven by a 28% increase in United States business, which included the contribution from an expanded NBA basketball data agreement serving several major sportsbooks. Rest-of-world (ROW) Betting has also been a strong point, with revenues up 25% y/y in Q4. In this case, Managed Betting Solutions (MBS) has received a positive client response, with data showing AI-driven in-game betting odds recalculations have boosted sportsbook profits, highlighting the value proposition of the service. For the full year, 2023 marked the 3rd consecutive year for revenue growth above 20% with the big story being a sharp expansion of the adjusted EBITDA margin to 19%, up 177 basis points from 2022. Adjusted EBITDA of EUR 167 million increased by 33%. source: company IR Key developments for the company have been the addition of exclusive global data rights covering leagues such as \"NASCAR\", \"Bundesliga\", and the \"South American Football Confederation\". Notably, Sportradar was selected to be the data, betting, and streaming rights holder for ATP Tennis through the next six years. In total, the company now works with more than 400 sports leagues and federations worldwide, with expectation for engagements to increase over time. source: company IR The backdrop here was strong enough for Sportradar's Board of Directors to move forward with an EUR 200 million share repurchase authorization. The expectation is that the buybacks begin when the corporate trading period opens following the Q1 earnings report in early May. Compared to the company's approximate EUR 3 billion market cap, the buyback represents a 7% shareholder yield. That program will be covered by the company's EUR 222 million net cash balance sheet cash and recurring free cash flow. In terms of guidance, management expects continued business momentum in revenue and adjusted EBITDA to grow \"at least 20%\" on an annual basis. That includes a pipeline of new product launches while leveraging existing partnerships and underlying market growth. What's Next For SRAD? What we like about Sportradar is that the company is well-positioned to capture the high-level trends in the global sports betting industry as its core market. The services are further diversified into historical data that media partners utilize in broadcasts and other distribution channels, but the understanding is that sports betting is the growth driver. The company's platform represents the backbone for sportsbooks, including pre-match data and calculated real-time odds that are now incorporating artificial intelligence that enhances risk management with efficient betting line setting. According to research from Goldman Sachs, sports betting is now a $10 billion industry just in the U.S. and is expected to grow towards $45 billion in annual betting over the next decade. As it relates to Sportradar, the opportunity here is that its analytics and contracts will become more and more valuable as the industry matures. At the same time, the company avoids the direct regulatory risks and financial compliance that its betting operator partners need to navigate when dealing with individual users. source: Goldman Sachs To be clear, Sportradar is not the only player in this category. We can point to the smaller Genius Sports Ltd. (GENI) that competes for similar exclusive contracts and data rights as well as the privately held \"Data-Driven Sports Analytics\". Still, we believe its leadership position and earnings momentum make it a good option for exposure to this segment. SRAD is currently trading at a 12x EV to forward EBITDA multiple, which represents a discount to GENI, even as SRAD is generating stronger growth. We'd also call SRAD a \"value pick\" compared to sports betting operators like DraftKings Inc. (DKNG) or even Flutter Entertainment plc (FLUT), which controls \"FanDuel\" that have faced more volatile earnings. Data by YCharts The bullish case for SRAD is that the company can keep executing its strategy and work to consolidate market share, with a path for results over the next several quarters to outperform expectations. Seeking Alpha Final Thoughts We rate SRAD as a buy with a price target for the year ahead at $13.00, representing a 15x multiple on management's 2024 adjusted EBITDA guidance. In our view, the latest results were strong enough to support a wider valuation premium based on improved confidence in the company's long-term earnings trajectory. The company's share buyback program can work as a catalyst for the stock going forward. In terms of risks, investors should consider that despite the growth tailwinds, the sports betting market is likely not immune to a potential deterioration of the economic backdrop. Efforts to limit the expansion of sports betting by governments would also force a reassessment of the earnings outlook.  Monitoring points over the next several quarters include trends in margins, cash flow, and updates on exclusive rights deals.","kind":null,"is_publish_news":null,"is_publish_highlight":null,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.22.4","shortVersion":"4.22.4","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2429430179"}