According to an Ark Invest report released this past July, the U.S. sports betting industry is expected to hit $37 billion by 2025. Globally, it’s projected at $179.3 billion by 2028. That’s a compound annual growth rate (CAGR) of 8.33%. To put that in perspective, the lifetime CAGR of the S&P 500, after adjusting for inflation, is just 6.6%.
Sports betting has always been big business. Legal off-track betting and the development of online betting apps have made it even bigger. In today’s article, we’re going to analyze two companies that are riding this growth wave. They’re not apps. Sportradar (NASDAQ: SRAD) and Genius Sports Ltd (NYSE: GENI) are companies that provide data to the apps and sports media outlets.
SRAD vs. GENI: Revenue, Profits, and Gross Margins
Sportradar has reported YTD sales of $562.80 million for 2021. That’s an increase of 28% from the $404.92 million they posted in 2020. Their gross margin is 77.60%, so profits are already above $436 million. In 2019, sales were $380 million, and profit was $319 million. The company’s market cap is $6.75 billion.
Genius Sports Ltd is reporting $168.11 million in 2021 sales with a loss of $184 million. It’s the company’s first year in business, so that’s to be expected. Their market cap is $3.81 billion, and sales are increasing 51.90% each quarter. Projected earnings per share (EPS) next year are at 90.20%, so expectations are high.
Share Price Analysis for Investors
A year-to-date analysis of share price performance reaffirms what revenue and profit numbers have already shown us. Sportradar, which opened the year at $25.05, currently sits at $23.23, a net loss of 7%. Most of that loss has come since September when they peaked at $27 a share. They are not alone. The S&P 500 and Nasdaq show similar dips during that period.
For a new company with negative cash flow, Genius Sports Ltd has done well on the market this year. Since going public on April 21st, the stock price hit a high of $24.93 in May and a low of $14.51 on July 20th. It’s currently at $18.55, but it’s remained steady around the $19 mark for the past month. Volatility has been minimal.
Which is the Better Investment?
From a numbers perspective, Sportradar appears to be the better investment. They are posting a profit and their margins are established. Genius Sports Ltd is losing money and still trying to achieve profitability. They’ve only been traded publicly for six months. Ironically, Sportradar went public in September, but they are still the more established firm.
One factor that could tilt this investor perspective in GENI’s favor is their exclusive partnership with the NFL. An Alger Investment report published on October 25th projects that Genius is in the best position to increase its market share, which is already over 40%. The company also has plans to increase its take rate to 5%, which should solve any existing cash flow problems.
If I were a betting man, I’d put my money on Genius Sports Ltd. They are a gamble because they’re not turning a profit yet, but I think the upside for them is bigger. Sportradar is a safer bet to hedge against losses, but I don’t believe they’ll provide a decent return next year.
Disclosure: Neither Spotlight Growth nor its officers have any position or relationship with any companies mentioned in this article. No payment was made to create this article. This article should not be taken as a solicitation or recommendation to buy or sell any securities. Please conduct your own research and consult your financial advisor to determine your risk tolerance and investment path. We are not licensed brokers or investment advisors.