Genius Sports Limited (GENI) Stock: Worthy Of A Small Bet – Seeking Alpha

betting bet sport phone gamble laptop concept

scyther5/iStock via Getty Images

scyther5/iStock via Getty Images
“The gambling known as business looks with austere disfavor upon the business known as gambling.” – Ambrose Bierce
Today, we put Genius Sports Limited (NYSE:GENI) in the spotlight for the first time. The company made a ballyhooed debut on the markets, but despite robust revenue growth, the shares have recently fallen on hard times. Can they rally from here? We attempt to answer that question via the analysis below.

GENI - Stock Chart

GENI – Stock Chart (Seeking Alpha)

GENI – Stock Chart (Seeking Alpha)

GENI - Potential Opportunities

GENI – Potential Opportunities (November Company Presentation)

GENI – Potential Opportunities (November Company Presentation)
Genius Sports Limited is based in London. The company develops, markets and distributes technology-led products and services to the sports, sports betting, and sports media industries. Among other capabilities, its products allow the collection, integration, and distribution of live data of sports leagues as well as streaming solutions which allow distribution for sports to commercialize video footage of their games. The company’s main customers are online sportsbook operators which enter multi-year contracts to access real-time sports data. It is a large and growing space as well as a significant opportunity.

Genius Sports - Testimonials

Genius Sports – Testimonials (November Company Presentation)

Genius Sports – Testimonials (November Company Presentation)
The stock currently trades at around $5.50 a share and has an approximate market capitalization of $1.05 billion. The company has partnerships with almost all the players in the online sports/betting space. Most of the company’s partners/clients are in Europe, but Genius Sports is also focused on expanding its footprint in the United States.

Genius Sports - Partnerships

Genius Sports – Partnerships (November Company Presentation)

Genius Sports – Partnerships (November Company Presentation)
On November 23rd, the company reported third quarter results. GAAP EPS came in at 37 cents, a quarter a share less than expected. However, revenues rose some 70% to just over $69 million which easily and significantly beat the consensus estimate. The company has recently announced partnerships with ‘Entain/BetMGM, FanDuel, Golden Nugget, Hard Rock Digital, Penn/Barstool Sportsbook, and PointsBet, Caesars, DraftKings (DKNG), WynnBet, and 888/SI Sportsbook‘.

GENI - Third Quarter Highlights

GENI – Third Quarter Highlights (November Company Presentation)

GENI – Third Quarter Highlights (November Company Presentation)
Here is the breakdown by business line during the quarter. Two small acquisitions, Sportzcast, purchased in December 2020, and Second Spectrum, bought in June 2021 help power nearly a 160% y/y rise in revenues from the company’s Sports Technology & Services division.
$ in thousands
Group Revenue
Betting Technology, Content & Services
Sports Technology & Services
Media Technology, Content & Services
Group Adj. EBITDA
Group Adj. EBITDA Margin
Leadership also slightly bumped up FY2021 guidance $2 million to a range of $257 million to $262 million.
Despite the collapse in the stock price, the analyst community has largely kept its faith around Genius Sports’ longer-term prospects. Over the past three months, six analyst firms have reiterated Buy ratings on the stock. Albeit, five of them had significant downward price target revisions. Current price targets proffered range from $10 to $20 a share. Here is the commentary from Benchmark which cuts its price target from $33 to $20 while maintaining its Buy rating on GENI.
Genius raised FY21 revenue guidance, but cut its AEBITDA expectation to breakeven to $5M. Reduced profit assumptions raise concerns over potential sports rights fee escalation and reduced profit from the NFL deal, said the analyst, who is cautious on growth from online sports betting and anticipates a greater portion of forward revenue growth will come from the company’s media and ad technology segment.
UBS reiterated its Neutral rating on December 13th and cut its price target in half to $9. The company ended the third quarter with just under $235 million of cash and marketable securities and negligible debt on its balance sheet after posting a net loss of approximately $70 million for the quarter.
The current analyst consensus sees a sharp decline in losses for the company in FY2022. Genius Sports is projected to lose roughly between 45 cents and a buck a share as revenues grow bit over 30% on a year-over-year basis to approximately $340 million. This is in line with recent company guidance that saw $340 million in overall sales in the 2022 fiscal year and between $430 million to $440 million in FY2023. This values GENI at around three times forward revenues.
Given the company’s growth prospects, the shares seem reasonably priced if not significantly undervalued with one caveat. That is simply that the company is burning through a prodigious amount of cash as it expands its business. Genius Sports last raised capital in early June. At that time, the company raised nearly $420 million via a secondary offering at $19.00 a share.
When the company reports fourth quarter earnings results this week, it will likely show more than half of those proceeds have already been used in operations as Genius Sports expands its footprint. The likely dilution from another capital raise (at much lower share price levels) could likely remain an overhang on the shares until the company addresses its funding needs and slows quarterly cash burn. Given this, GENI seems worthy only of a small ‘watch item‘ position for now.
“Maybe the difference between first marriage and second marriage is that the second time at least you know you are gambling.” – Elizabeth Gilbert
Bret Jensen is the Founder of and authors articles for the Biotech Forum, Busted IPO Forum, and Insiders Forum
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Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, but may initiate a beneficial Long position through a purchase of the stock, or the purchase of call options or similar derivatives in GENI over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.


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