These two companies service the highly lucrative sports betting industry so which is the better investment: Genius Sports or Sportradar?
Oct. 23, 2021
Genius Sports (NYSE: GENI) was founded in London in 2015 and went public in April via a SPAC merger. Its competitor, Sportradar (NASDAQ: SRAD) was founded in Switzerland in 2001 and also took the SPAC route to go public last month. Although not offering a sportsbook for betting, the companies are responsible for providing data, infrastructure, risk management, and the automated acceptance or rejection of bets. With the online sports betting market projected to reach $40 billion in the next decade in the U.S. alone, which is the better investment right now: Genius Sports or Sportradar
Genius Sports: the bulls and the bears
Genius Sports has three different revenue streams that are all up year-over-year (YoY) as per its latest quarterly report (Q2 2021); moreover adjusted EBITDA is up over 126% in the same time period. The company also adjusted its projections for revenue and earnings for the whole year upwards. All good signs and better yet, it has secured an enviable exclusive position with the National Football League (NFL) for providing data rights to the tune of $120 million per year for six years.
At least $12 billion is expected to be spent on sports betting in the NFL this season and Genius Sports offers an invaluable tool for placing bets and even detecting fraudulent gambling activity. Additionally, the company’s data is important for in-play betting, which accounted for 50% of all bets placed last year and is expected to surge to 75% in the next few years. And the NFL isn’t the only organization it has deals with; the company also deals with various soccer leagues in Europe, the PGA, NCAA, and NASCAR to name just a few.
On the negative side of things, some analysts feel that Genius Sports’ deal with the NFL is too expensive and might impact costs for partners and lower margins for the company. Further, all the recent online betting was probably the result of people being forced to stay at home and business might be impacted now that things are returning back to normal.
Sportradar: the bulls and the bears
According to the company’s Q2 2021 report, revenue, gross profit, and operating profit are all up nearly 75%, 87%, and 47%, respectively, YoY. Unlike Genius Sports, Sportradar has been profitable for at least two years and has big-name backers like Mark Cuban and Michael Jordan. The company hopes to beef up its infrastructure and provide real-time data and analytics for in-play betting to be akin to that of the online equities trading world. Finally, with a dollar-based net retention rate of 138%, the company is obviously doing something right.
Outside of people returning back to normal and somehow abandoning sports gambling, Sportradar doesn’t have any bears. People might start gambling at casinos or attending sporting events without making a wager.
So, which is the better investment right now?
We make it a policy not to endorse a stock that hasn’t had at least two earnings reports here at MyWallSt and, on that basis, I cannot make a recommendation. However, after the reports are released, I reckon Sportradar will be the safer long-term play.
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