Formula One Group: TD Cowen's Top Stock Pick for 2024
TD Cowen has named Liberty Media's Formula One Group as its top stock pick for 2024, despite concerns about the saturation of interest in Formula One and the fragmentation of sports broadcasting rights. Analyst Stephen Glagola believes that investors are not fully recognizing the potential of the company. In a note, Glagola described Formula One as a "capital-light royalty" on the growth and monetization of a premium global sports league. He highlighted the company's contracted revenue and variable cost structure, which provide low execution risk and resilience against potential weaknesses in consumer spending.
Underpenetrated U.S. Market and Positive Attendance Trends
Glagola noted that Formula One remains underpenetrated in the U.S. market, despite a 19% year-over-year growth in TV subscriptions from January to October. He also pointed out that race attendance trends in North America were positive in 2023 compared to the previous year. These factors indicate untapped potential for growth and increased interest in the sport.
Future Catalysts and Profit Outlook
Glagola forecasts more catalysts for Formula One in 2024, including the return of the China Grand Prix for the first time since 2019. Additionally, there will be 24 Formula One races in 2024, compared to 22 in 2023. Glagola expects profit from the Las Vegas Grand Prix to rise from 2024 onwards. He also highlighted favorable structural tailwinds, such as market power in national content distribution negotiations and increasing demand for scarce sports assets, which bode well for Formula One's future.
In conclusion, TD Cowen sees great potential in Liberty Media's Formula One Group for 2024. Despite concerns about market saturation and broadcasting rights, the company's contracted revenue, variable cost structure, and underpenetrated U.S. market position it for success. With upcoming catalysts and favorable industry trends, Formula One is poised for a rally in the coming year.
Formula One Group's Potential Impact on New Business Formation
TD Cowen's endorsement of Liberty Media's Formula One Group as a top stock pick for 2024 could have implications for new businesses. Despite concerns about market saturation and sports broadcasting rights fragmentation, the company's potential is seen as under-recognized by investors.
Opportunities in the U.S. Market
Analyst Stephen Glagola notes that the U.S. market remains underpenetrated for Formula One, despite a 19% year-over-year growth in TV subscriptions. Positive race attendance trends in North America also indicate an untapped potential for growth. These factors suggest that new businesses in the sports broadcasting and related sectors could find opportunities in the U.S. market.
Resilience and Growth Prospects
Formula One's contracted revenue and variable cost structure provide resilience against potential weaknesses in consumer spending, offering a model for new businesses in uncertain economic times. The company's upcoming catalysts, including the return of the China Grand Prix and an increase in the number of races, suggest strong growth prospects.
Future Industry Trends
Glagola highlights favorable structural tailwinds for Formula One, including market power in national content distribution negotiations and increasing demand for scarce sports assets. These trends could shape the landscape for new businesses in the sports industry.
In light of these factors, new businesses can draw valuable insights from Formula One's strategies and growth prospects. Despite challenges, the company's resilience and untapped market potential provide a blueprint for success in the sports industry.
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