Juventus Set For Turnaround From Windfall And Talent Development

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Juventus anticipates over €110m from the Champions League and Club World Cup, plus €180m from developing young talent, presenting a compelling investment opportunity.Juventus' strong brand, increased ...

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You can become one too! Share your best investment idea by submitting your article for review to our editors. Get published, earn money, and unlock exclusive SA Premium access. Click here to find out more » liosc/iStock Editorial via Getty Images Introduction Juventus Football Club S.p.A. (OTCPK:JVTSF), a renowned Italian football club, anticipates over €110 million windfall over the next 2 years from qualifying for the important Champions League and Club World Cup. Additionally, the club created over €180 million of value from developing the young squad. Despite this, the stock price remains at multi-year lows, presenting an attractive investment opportunity with multi-bagger potential. Overview Founded in 1897, Juventus has evolved from a local club in Turin to an international powerhouse. The club's achievements are under the Agnelli family's ownership, controlling 66% through Exor (an Italian diversified holding company). This is the longest active ownership of a professional sports entity at 96 years. Juventus ranks 11th in the Deloitte Football Money League 2024 by revenue. Juventus boasts 36 league titles, including 9 consecutive titles between 2011 and 2020. With over 15 million supporters in Italy, 175 million followers according to Forbes Italia, 47 million on Facebook, 60 million on Instagram and 30 million on TikTok, Juventus is the most supported club in the country. Brand After Covid, attendance at home games boomed in 2022 and rose again with 8% in 2023. This is impressive considering rising ticket prices with 7% and a lack of European matches. From the latest Deloitte report: \"Serie A club revenue totalled €2.9bn in the 2022/23 season, marking a record for the league and a 22% increase on the previous season. Match-day revenue rose by 88%, broadcast revenue by 15% and commercial revenue by 14%. This is due to increased match-day revenue, improved sponsorship deals, and utilizing stadiums beyond match-days\". Managing Director Francesco Calvo recently said: \"Using Cristiano Ronaldo as a star player from 2018 to 2021 was a smart move. Despite tough times with the pandemic, it helped the company increase its brand power worldwide\". In Brand Finance's latest report, Juventus, Inter, and AC Milan are ranked 12th, 14th, and 15th among 2024's leading football club brands. In the 2023/24 Serie A season, Juventus was the most-watched team in Italy with nearly 249 million viewers (1.1 million per match, ahead of rivals Inter and Milan). According to the latest TV ratings, in the first three days of the Serie A championship of the 2024/25 season, the matches played by Juventus were the most watched by viewers. These figures suggest that the club has enduring power and prestige. UEFA Champions League (CL) UEFA is the governing body of football in Europe. Qualifying for the UEFA Champions League group stage is the most important and lucrative goal each season. In March 2024, they announced a new format for the CL with significant changes:  Increased Revenue Distribution: UEFA will distribute €2.5 billion per season for the 2024-2027 cycle, up from €2 billion per season in the 2021-2024 cycle, close to +25% increase. Expanded Team Participation: Teams will increase from 32 to 36, with each team playing 8 matches instead of 6. This change benefits top teams by increasing their chances of reaching the next phase and earning more money. Additional Qualification Slots: Two extra slots will be awarded to associations with the best rankings from the previous season, advantageous for Italian teams, as they are in the top 2 rankings.  To evaluate Juventus's likely finish, I considered several indicators. As I said before, Juventus ranks 11th in the Deloitte Football Money League 2024 by revenue, 12th in Brand Finance's latest report, and 12th in Transfermarkt's Champions League ranking, with a squad value of €575 million and an average player price of €21 million. The record from the last 10 years clearly illustrates the team's history and performance. Given this consistency, it's reasonable to expect a similar finish around these standings this season: 2014 Final (runner-up). 2015 R16 (last 16). 2016 Final (runner-up). 2017 Quarter-final (last 8). 2018 Quarter-final (last 8). 2019 R16 (last 16). 2020 R16 (last 16). 2021 R16 (last 16). 2022 Group Stage. 2023 Did not participate. I estimate a 25% chance of a top 8 finish, a 65% chance of a top 16 finish, and a 10% chance of failure, finishing between 25th and 36th place. This results in an expected finishing position around 12th-14th place. Juventus' financial earnings from the league phase can be broken down as follows:  The starting fee is €18 million. Performance-related earnings €10 million. League ranking bonus of €6 million. Value Pillar 30 million.  Juventus Value Pillar (European Part) Juventus' ranking is determined by two key factors:   Domestic Broadcasters' Media Revenue: Juventus ranks 13th, based on recent deals:  England: €550 million per season France: €480 million Germany: €405 million (€315 million from DAZN, €90 million from Amazon) Italy: €330 million (€220 million from Sky, €110 million from Amazon) Spain: €320 million USA: €250m    UEFA Five-Year Coefficient: Juventus is ranked 19th this season, with past placements of 19/8/8/5/5 over the last 5 seasons. The combined average ranking (13 for media revenue + 19 for UEFA coefficient) is 16th, earning Juventus 21 shares (Note: the highest-ranked team earns 36 shares, and the lowest earns 1 share.)  Value Pillar (Non-European Part) This is based on the 10-year UEFA coefficient. Juventus ranks 8th this season, with past placements of 8/5/4/6/6 over the last 5 seasons, earning 29 shares. Revenue Estimation The European and non-European parts are split 75/25. Therefore: 75% of 21 shares * €1.28 million (European) + 25% of 29 shares * €1.28 million (Non-European) = approximately €30 million. In total, Juventus' projected revenues are at least €64 million, including the starting fee (€18 million), performance earnings (€10 million), league ranking bonus (€6 million), and Value Pillar payout (€31 million). FIFA Club World Cup (CWC) FIFA is the international governing body for association football, overseeing major tournaments like the World Cup and The FIFA Club World Cup. Beginning in 2025, FIFA will expand the CWC from 7 to 32 teams and offer substantially larger prizes to the potential participants. While official details are not yet announced, media sources estimate participating clubs could earn approximately €25-30 million, depending on prize money, broadcast, and marketing agreements. The tournament will be held across the USA, providing an excellent platform for international advertisements targeting all participating countries and continents. Juventus is already 100% qualified for the competition thanks to UEFA's 4-year ranking. Within the pool of 32 participating teams, 20 are non-European teams, meaning they are demonstrably weaker than Juventus. European dominance in global football is stark: European teams have won the last 10 CWC finals, often without reaching their full potential. My estimation is that Juventus has a good chance of progressing to the knockout stages and reaching at least the top 8. Based on my analysis and the latest news, I estimate a team from Juventus level at around €40-45 million for participating. Player Assets & Monetizations For players' market value evaluations, I use Transfermarkt (Germany) and CIES Observatory (Switzerland). While the values there are somewhat imprecise, they are close enough to reality for informative comparison. After the 2018 reforms, it was decided that the leading top clubs could field reserve teams in the third division. Juventus took advantage by creating their Next Gen U23 team with the goal of bridging the gap between youth and first-team football. Words from the Ex-director Cherubini: \"In March 2022, we decided that at least 3 Next Gen players had to participate in the Juventus squad. Now, we are quite satisfied because we have 6 Next Gen players with over 200 appearances. We have reduced costs by 24%. The Next Gen project will remain for many years.\" This approach holds the potential for lucrative transfer fees. To check if their strategy is working I researched the top three teams (Juventus, Inter, Milan) for players (currently owned+loaned to other clubs) who came only through their youth system and found that Juventus had 8 players with a market value of over €150 million, while Inter and Milan are way behind with under €80 million and €40 million respectively. The Next Gen project has yielded:  Two key players in the current squad, aged 19 and 23, with strong prospects valued at €50 million. One player is currently on loan, valued at €15 million. Six players sold, aged 19-24, generating €90 million. Three top talents integrated into the squad, aged 20-21, with a combined value of €25 million.  The Next Gen project is paying off with a more than €180 million increase in the value of the players who were developed. By integrating young talent, it has reduced costs and shows promise to further enhance results financially and on the pitch in the coming seasons. Why this opportunity exists Juventus faced numerous challenges in recent years: 2016-2019 heavy investments in high-profile players; 2020-2021 - COVID-19 pandemic; 2022 - Board change amid financial difficulties and investigations. Then, in May 2023, there was this suspension (-10points) in Serie A for financial irregularities and false accounting and missing the 2023-24 CL. Later, Juventus reached an agreement with UEFA, resulting in a €20m fine for breaching Financial Fair Play rules. The new chairman Gianluca Ferrero commented: \"This outcome was preferable, as we wouldn't have endured 2+ years without European tournaments\". With all investigations concluded and new management, Juventus is likely to adopt a more conservative and disciplined approach. The new strategy will focus on reducing debt, controlling spending, and investing more in young players. In November 2023, shareholders approved €200 million rights offering to offset losses from missing the CL. This was executed in March, with major shareholder Exor participating at prices around current levels, signaling confidence in the club's future. Management Cristiano Giuntoli, the sporting director, joined the management team in July 2023 and is considered the most important figure within it. He built Napoli's title-winning team for the 2022/23 Serie A season, securing their first title in 33 years. He is known for assembling strong squads while maintaining financial discipline. Even Manchester United showed interest in signing him in May 2023, but he ultimately chose Juventus. He had a busy summer transfer window, cutting the wage bill from €120 million to €106 million and lowering the team's average age, with only one key player over 27. This transfer market has been one of the most significant in recent years. Financial Analysis It is more appropriate to compare season 24/25 (2024E) to season 22/23 (2022A), the last time they played in the Champions League. Expected changes are as follows:     2020A 2021A 2022A 2023E* 2024E   Revenues (€ million) 481 443 508 406 588   Operating Costs 466 468 427 397 367   Amortization, write-downs and provisions 228 196 179 170 160   Operating Income -214 -221 -99 -161 61   EBITDA 14 -25 80 9 221   Click to enlarge Revenue for 2024E vs. 2022A +15%(€588 million)  TV: €225 million (+43% due to CL revenue). Sponsorships & Ads: €165 million (+10% due to new better sponsorship deals thanks to CL & CWC matches). Ticket Sales: €68 million (+14% due to rising ticket prices and full attendance). Sales of Products/Other: €70 million (+2%). Profit on Player Sales: €60 million (+15% vs. the average of last 4 seasons transfers, Next Gen U23 project).  Cost Cutting Player wages are the most significant cost for a football club due to top talent demands, competitive market conditions, and their impact on financial stability. They will be significantly reduced from €255 million in 2022A to €155 million in 2024E. Juventus is implementing a cost-cutting strategy by replacing high-salaried veterans (earning around €10 million annually) with promising young players from its Next Gen project, who earn significantly less (€1-2.5 million). This shift is expected to yield substantial savings, with contract terminations projected to reduce expenses by €40 million in both 2023E and 2024E. Valuation I anticipate EBITDA to range between €175 million and €225 million for the projected 2024, driven by reduced operating costs. This improvement could catalyze a return to historical valuation multiples of 9x to 11x EBITDA. Achieving these targets implies a potential enterprise value of €2.0 billion (based on €200 million * 10x), significantly higher than the current market capitalization of €900 million, suggesting substantial upside potential. European footballing peer Manchester United's EV/EBITDA is 18x, that of Borussia Dortmund is 3x, Ajax 5x, and SS Lazio 2x. Balance sheet total assets are down from €833 million to €678 million from June 2023 to June 2024, and total liabilities are down from €791.9 million to €638.8 million thanks to the rights issue. Total shareholders' equity is €40 million. Risks and Concerns Problems with Club World Cup There are organizational and planning risks. This year's Copa America in the USA was poorly planned, suggesting a similar risk for this tournament. FIFPro has raised concerns about player health due to excessive matches, potentially creating friction. TV rights will be sold country-by-country, and the situation remains uncertain. New management messed up the transfer policies in the summer transfer season The sporting director has been in place for a year, having previously worked at a different club with different expectations and ownership. Unlike Napoli, which isn't a constant title contender, Juventus faces relentless pressure. Giuntoli faced challenges in bringing certain players to Juventus, compounded by financial constraints. Despite the positive outlook, it's realistic to expect some new players may underperform, potentially losing value and money for the club. Additionally, during the transfer window, Italian clubs often demand higher prices from Juventus, their main and most disliked competitor. Players' quality is exaggerated, whether as individuals or as a team The team has introduced eight new players, with four joining during the final week of the transfer window. This influx of talent introduces uncertainty regarding team dynamics and cohesion. While the players' biographies are impressive, this does not guarantee immediate peak performance. Additionally, the quartet of late arrivals may require several weeks to adjust and fully grasp the manager's strategic approach. Conclusion With these factors in mind, I anticipate significantly improved financials and better earnings results in the upcoming quarters. Over the next 2 years, this will positively influence the stock price and hopefully lay a foundation for long-term success. Over the next 4-5 years, I believe they could possibly be a multi-bagger. It seems the market is not pricing any of the possible good news for now. Catalysts  Start of Serie A & Champions League matches. Players' development and monetization help the financial results. Club World Cup interest climbs as event nears.   Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. 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