Hyper-personalized Products Like 4Sight Streaming Will Redefine Future Sports Engagement

Key Takeaways

• Long-term sports content deals and hyper-personalized products are expected to drive sustained revenue growth and margin expansion.
  
• AI-driven products and strategic acquisitions are anticipated to enhance trading performance and improve long-term profitability.
  
• Dependency on sports rights deals, currency volatility, regulatory changes, and competitive pressures create risks to Sportradar's margins and earnings growth.

Catalysts

Provides sports data services for the sports betting and media industries in the United Kingdom, the United States, Malta, Switzerland, and internationally.

• Sportradar's strategy to secure long-term sports content deals for major sports such as basketball, soccer, hockey, and tennis provides cost structure visibility and a long runway for innovation, potentially driving sustained revenue growth and future margin expansion.
  
• The expansion and scalability of hyper-personalized products like 4Sight Streaming and micro market betting are expected to tap into new revenue streams and enhance in-play betting engagement, likely boosting future revenues and net margins.
  
• The growth of Managed Trading Services (MTS) and the adoption of AI-driven products like Alpha Odds are expected to optimize trading performance and increase betting margins, contributing positively to net margins and earnings.
  
• Sportradar’s focus on leveraging their global distribution network and sports dataset to innovate and expand their product offering is anticipated to increase revenue streams, thereby enhancing future revenue growth and profitability.
  
• The company’s strategy to integrate acquisitions such as XLMedia into its 360-degree offering, aiming for margin expansion, is expected to improve operating leverage and long-term earnings.

Sportradar Group Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Sportradar Group's revenue will grow by 13.0% annually over the next 3 years.
• Analysts assume that profit margins will increase from 5.6% today to 13.2% in 3 years time.
• Analysts expect earnings to reach €200.3 million (and earnings per share of €0.6) by about December 2027, up from €58.9 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 37.0x on those 2027 earnings, down from 84.9x today. This future PE is greater than the current PE for the US Hospitality industry at 24.3x.
• Analysts expect the number of shares outstanding to grow by 3.67% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.29%, as per the Simply Wall St company report.

Sportradar Group Future Earnings Per Share Growth

Risks

• The dependency on sports rights deals for leagues like ATP and NBA can create vulnerability to renegotiations that could impact profit margins if costs rise significantly. This reliance could adversely affect Sportradar's net margins and long-term earnings if terms are less favorable.
  
• There is substantial investment in expanding premium sports rights, which increases financial pressure and the risk of not fully achieving projected revenue growth and margin expansion. Unexpected increases in sports content costs could impact net margins and dampen earnings growth.
  
• Potential volatility in foreign currency markets, as seen with unrealized currency fluctuations, can lead to financial uncertainty and impact net profit margins by affecting the costs and profit conversions in different regions.
  
• Regulatory changes or unexpected barriers in large markets like Brazil might lead to increased operational costs or restricted access, affecting revenue streams and overall margins. This regulatory unpredictability could hinder earnings growth.
  
• Competitive pressures, particularly around product innovation and client demand for seamless technology integration, may necessitate continued high levels of investment that could limit short-term profitability and impact operating margins if growth does not match these expenditures.

Valuation

• The analysts have a consensus price target of €18.07 for Sportradar Group based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €24.17, and the most bearish reporting a price target of just €11.84.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2027, revenues will be €1.5 billion, earnings will come to €200.3 million, and it would be trading on a PE ratio of 37.0x, assuming you use a discount rate of 7.3%.
• Given the current share price of €17.6, the analyst's price target of €18.07 is 2.6% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.