Guggenheim reaffirmed its Buy rating on Liberty Formula One (NASDAQ:FWONK) with a steady price target of $90.00, expressing optimism for the company's upcoming U.S. media rights renewal. Guggenheim's projections suggest a significant increase in the annual average value (AAV) of Formula One's U.S. media rights, from the current $85 million to approximately $135 million.
The firm's positive outlook is based on several factors, including consistent and significantly improved ratings trends over several years, a strong U.S. sports rights market with high demand, particularly from technology companies, and the value that Formula One offers.
Despite concerns about Disney's readiness to increase its investment, Guggenheim notes potential interest from major streaming platforms such as Amazon (NASDAQ:AMZN), Netflix (NASDAQ:NFLX), and Apple (NASDAQ:AAPL), highlighting Amazon and Netflix as especially fitting partners due to their extensive U.S. reach, growing sports portfolios, and robust promotional capabilities that could support Formula One's transition from ESPN.
The valuation for Liberty Formula One remains unchanged, with a Buy rating sustained for both FWONK and FWONA shares, the latter having a price target of $84. The price targets are anchored on a 23x 2025 estimated EV/EBITDA multiple, reflecting the unique value of premium sports assets, stable live event cash flows, low capital intensity, and significant growth opportunities in key revenue areas such as race promotion, broadcasting, and advertising/sponsorship.
Guggenheim believes that Formula One is well-positioned to deliver attractive shareholder returns and cater to a passionate global fan base estimated at half a billion people. The spread between FWONA and FWONK share price targets represents the historical average, indicating a consistent approach to valuation by the firm.
In other recent news, Liberty Media Corporation and Sirius XM Holdings (NASDAQ:SIRI) Inc. have announced the final steps in their planned reorganization, culminating in a merger to form a new public entity operating under the Sirius XM brand.
This reorganization aims to streamline the corporate structure and create a standalone company offering a diverse mix of live, on-demand, and curated audio entertainment. In parallel, Liberty Media Corporation is proceeding with a public offering of over 10 million shares to fund its proposed acquisition of Dorna Sports, the commercial rights holder for the MotoGP motorcycle racing series.
The acquisition is expected to be finalized by the end of 2024, with all necessary regulatory filings in place. Meanwhile, Citi has reaffirmed its Buy rating on shares of Liberty Media Corp-Liberty Formula One, maintaining a consistent price target of $77.00.
In the company's recent Q2 2024 earnings report, SiriusXM maintained a solid financial position, and the Formula One Group, a subsidiary of Liberty Media, saw a 29% increase in revenue and a 35% increase in OIBDA.
As always, investors and stockholders are advised to review the relevant documents and statements provided by Liberty Media and Sirius XM for further details.
InvestingPro Insights
To complement Guggenheim's optimistic outlook on Liberty Formula One, InvestingPro data reveals some interesting financial metrics. The company's market capitalization stands at $18.03 billion, with a P/E ratio of 64.72, indicating that investors are willing to pay a premium for future growth prospects. This aligns with Guggenheim's positive view on the upcoming U.S. media rights renewal.
InvestingPro Tips highlight that Liberty Formula One is trading near its 52-week high, which corroborates the market's confidence in the company's future performance. Additionally, the company has shown strong revenue growth, with a 43.43% increase in the last twelve months as of Q2 2024, supporting Guggenheim's projection of increased value in media rights.
It's worth noting that while the company is profitable and has delivered a high return over the last decade, it does not pay a dividend to shareholders. This suggests that Liberty Formula One is reinvesting its profits to fuel further growth, which could be beneficial as it explores new opportunities in the U.S. sports rights market.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips that could provide deeper insights into Liberty Formula One's financial health and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.