Key Takeaways

Heightened global regulations, eco-consciousness, and demographic shifts threaten revenue from sponsorships, hosting fees, and fan engagement, impacting long-term growth.
Rising technology costs and unstable media revenues challenge profitability, while expanding in emerging markets faces greater public and fiscal resistance.
Global fanbase growth, digital expansion, premium sponsorships, and sustainability initiatives are diversifying and stabilizing revenues while enhancing brand strength and long-term earnings potential.

Catalysts

About Formula One Group

Engages in the motorsports business in the United States and the United Kingdom.What are the underlying business or industry changes driving this perspective?

Formula One Group faces significant long-term headwinds from increasing global environmental regulations and growing eco-consciousness, which are likely to constrain sponsorship growth and could reduce government hosting fees in key markets—both of which would have a direct negative impact on revenue and margin expansion over the coming years.
The secular shift away from traditional linear television, along with the proliferation of ad-blocking and fragmented digital consumption habits, is poised to erode Formula One’s traditional media rights revenues and advertising value, pressuring earnings as older broadcast channels decline faster than new digital revenue streams can mature.
Demographic changes threaten the sport’s long-term ability to sustain its global fan base, with a risk of declining ticket sales and merchandise purchases as core audiences age and younger generations prefer alternative or digital-first sports, resulting in lower top-line revenue growth and weaker ancillary income.
Cost pressures from the need to continuously invest in hybrid, electric, and sustainable fuel technologies to remain compliant and relevant in a decarbonizing mobility landscape are set to weigh on net margins, especially as these investments may not be fully offset by incremental revenue from fans or sponsors.
Reliance on escalating government hosting fees and expansion into emerging markets is increasingly untenable as public scrutiny and fiscal tightening intensifies, creating a risk of event cancellations, contract renegotiations, or outright losses on the race calendar that would depress Formula One’s revenue and operating income over the long term.

Formula One Group Earnings and Revenue Growth

Formula One Group Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

This narrative explores a more pessimistic perspective on Formula One Group compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
The bearish analysts are assuming Formula One Group's revenue will grow by 12.6% annually over the next 3 years.
The bearish analysts assume that profit margins will increase from 0.4% today to 10.9% in 3 years time.
The bearish analysts expect earnings to reach $543.8 million (and earnings per share of $2.48) by about July 2028, up from $13.0 million today. The analysts are largely in agreement about this estimate.
In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 62.2x on those 2028 earnings, down from 1968.3x today. This future PE is greater than the current PE for the US Entertainment industry at 26.0x.
Analysts expect the number of shares outstanding to grow by 5.59% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 9.02%, as per the Simply Wall St company report.

Formula One Group Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Formula One Group continues to experience robust global fan growth and engagement, with attendances and viewership reaching new records across multiple markets, particularly among younger demographics and in key regions such as the US, Asia, and Latin America, which could drive sustained increases in ticket, hospitality, and merchandise revenues.
The company is seeing ongoing expansion and strong demand from sponsors, including high-value renewals and new blue-chip partnerships, supported by mid
to long-term contracts that provide visibility for future sponsorship revenues and help stabilize net margins.
F1’s strategic emphasis on digital content, evidenced by accelerating growth in F1TV subscribers, successful launches of premium streaming tiers, and record engagement on social media, is improving direct-to-consumer monetization and positioning the company for higher-margin, recurring digital earnings.
Multi-year race hosting extensions, such as the Miami Grand Prix through 2041 and Mexico through 2028, as well as the opening of new venues and year-round experiential activations like Grand Prix Plaza in Las Vegas, are diversifying and growing the company’s top-line through stable and potentially expanding race promotion revenue streams.
Formula One’s commitment to sustainability—including adoption of 100% sustainable fuels from 2026 and ongoing investment in environmentally conscious technology—aligns the company with long-term regulatory and consumer trends, reducing risk to sponsorship and host city partnerships, while supporting revenue resilience and long-term brand value.

Valuation

How have all the factors above been brought together to estimate a fair value?

The assumed bearish price target for Formula One Group is $89.02, which represents two standard deviations below the consensus price target of $114.0. This valuation is based on what can be assumed as the expectations of Formula One Group's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $140.0, and the most bearish reporting a price target of just $87.0.
In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be $5.0 billion, earnings will come to $543.8 million, and it would be trading on a PE ratio of 62.2x, assuming you use a discount rate of 9.0%.
Given the current share price of $102.58, the bearish analyst price target of $89.02 is 15.2% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
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.

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