Citi Upgrades Formula One, Dismissing Concerns on Las Vegas Race
Citi has recommended buying shares of Liberty Media Formula One, upgrading the stock from neutral to buy and maintaining a price target of $71. This suggests a potential upside of over 17% from the stock's closing price of $60.34 on Thursday. While shares of Formula One have experienced high volatility throughout the year, with an overall increase of 17.7%, they have declined by 6.7% over the past three months. Analyst Jason Bazinet attributed this volatility to growing skepticism surrounding the Las Vegas Grand Prix and increasing optimism regarding a potential deal with Apple.
Opportunity for Growth and Overblown Concerns
The introduction of the Las Vegas Grand Prix led to Formula One raising its capex outlook to $400 million, which raised investor skepticism about the race. However, Bazinet believes these concerns are "overblown" and views the upcoming event as an opportunity to expand Formula One's presence in the United States. He noted that, based on their estimate of the race's economics, the increased capex would extend the payback period by approximately three years. Despite the additional capital expenditure, Bazinet is not overly concerned as he believes the Las Vegas event could drive U.S. engagement and boost media rights revenue.
Positive Factors for Formula One
Bazinet highlighted two reasons why Formula One is not subject to the same negative sentiment surrounding U.S. sports rights renewals. First, Formula One's total U.S. rights contribute only 3% of the company's total revenue, compared to 38% for TKO. Second, Formula One's U.S. viewership has been consistently growing, unlike TKO, which has faced pressure. Moreover, the analyst supported his optimism with reports of Apple's interest in purchasing Formula One's global TV rights for $2 billion. If these reports prove true, Bazinet sees an incremental upside of around 10% from current levels, considering the relative risk-reward associated with Apple's prospective interest.
In conclusion, Citi's upgrade of Formula One reflects its positive outlook on the stock, dismissing concerns surrounding the Las Vegas Grand Prix. The bank sees potential for growth in Formula One's U.S. presence and views the increased capex as a worthwhile investment. Additionally, Formula One's favorable position in U.S. sports rights renewals and the reported interest from Apple further contribute to the optimistic sentiment.
Implications of Citi's Formula One Upgrade for New Business Ventures
Citi's recent upgrade of Liberty Media Formula One from neutral to buy signals a potential upside of over 17% from the stock's recent closing price. This move, which comes despite the stock's high volatility and a decline over the past three months, offers valuable insights for new businesses.
Overcoming Investor Skepticism
The introduction of the Las Vegas Grand Prix led to Formula One raising its capex outlook, sparking investor skepticism. However, Citi analyst Jason Bazinet dismissed these concerns as "overblown", seeing the event as an opportunity to expand Formula One's U.S. presence. This perspective underscores the importance for new businesses of seizing opportunities for growth, even in the face of investor skepticism.
Capital Expenditure and Market Engagement
Despite the increased capex, Bazinet is not overly concerned, believing that the Las Vegas event could drive U.S. engagement and boost media rights revenue. This view highlights the potential benefits of strategic capital investment for new businesses, particularly in terms of enhancing market engagement.
Positive Prospects Amid Negative Sentiment
Bazinet also pointed out that Formula One is not subject to the same negative sentiment surrounding U.S. sports rights renewals. This is due to Formula One's U.S. rights contributing only a small percentage of the company's total revenue and its consistently growing U.S. viewership. Furthermore, the potential deal with Apple could provide an additional upside. These factors illustrate the potential for new businesses to thrive even amidst negative market sentiment, provided they have a diversified revenue stream and a growing customer base.
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