The Sportsradar Group AG (NASDAQ: SRAD) could make money from the explosive growth of the sports betting market.
To explain, Sportsradar is a Swiss data-as-a-service (DaaS) company that claims to collect data on over 750,000 sporting events in 83 sports in 120 countries. Sportsradar’s partners include the NBA, the National Hockey League (NHL), Major League Baseball (MLB), NASCAR, FIFA, and the UEFA – the sponsor of the Champions League.
Sportsradar sells sports data and DaaS services to over 1,600 customers in over 120 countries. Those customers include Fandel, Draft Kings, Google, Yahoo! Sports, Twitter, CBS Sports, and Facebook (FB). Markets for Sportsradar data include the new media, fantasy sports, sports analytics platforms, and sports betting.
Sports Betting Grows
In particular, I think betters are some of the biggest customers for sports analytics platforms. The sports betting market is growing fast. The Global Sports Betting market could grow from $131.11 billion in 2020 to $179.3 in 2028 billion in Zion Market Research estimates.
Statista estimates that were 30,861 sports betting businesses worldwide in 2020. Statista estimates the value global sports betting market was $218.49 billion in 2021. Thus, Statista estimates the sports betting market is already larger than Zion Market Research’s estimate for 2028.
The reason for the growth is that around 25 American states and the District of Columbia now have at least some legalized sports betting, Legal Sports Betting Report estimates. In addition, six states could legalize gambling with new laws by the end of 2021. Plus, New York State could soon legalize online sports betting, the Empire State already allows retail sports betting.
The US Supreme Court opened the door to online sports betting by striking down a a federal law against online betting in a 2018 case called Murphy v. National Collegiate Athletic Association. To elaborate, Murphy gives state governments the ability to allow online sports betting.
Consequently, Ark Invest estimates the US sports betting market could grow from $9.5 billion in 2021 to $37 billion in 2025. In addition, 11 US states now have $1 billion sports betting markets, Front Office Sports estimates.
How Sportsradar could cash in on Sports Betting
Sportsradar can cash in on the growing US sports betting market with an office in New York City.
Sportsradar markets its services to bookmakers and sports betting companies. Sportsradar claims over 85% of US bookmakers use its services. If the claim is true 900 American sports-betting companies use Sportsradar’s services.
The DaaS services Sportsradar offers to bookmakers include: sports book & gaming platforms, live data, odds, managed trading services, betting entertainment, live streams of sports, virtual sports and marketing services.
Thus, Sportsradar services one of the fastest growing businesses in America. I think Sportsaradar could be a value investment in the Data-as-a-Service sector.
Does Sportsradar make money?
Sportsradar (SRAD) makes small amounts of money from its DaaS solutions. For example, the company reported quarterly revenues of $173.13 million, a quarterly gross profit of $43.77 million, and $18.86 million in quarterly common net income on June 30 2021.
There is some growth at Sportsradar. The quarterly revenues grew from $90.52 million on 30 June 2020 and $15.74 million on 31 March 2021. Meanwhile, the quarterly gross profit grew from $21.81 million on 30 June 2020 and $38.87 million on 31 March 2021. Plus, the quarterly net income grew from $8.4 million on 30 June 2020 and $2.66 million on 31 March 2021.
I think these numbers show Sportsradar is growing with the sports-betting industry. However, Sportsaradar has less cash. For instance, quarterly operating cash flow fell from $49.79 million on 30 June 2020 and $51.45 million on 31 March 2021 to $29.75 million on 30 June 2021. Additionally, the cash and short-term investments fell from $448 million on 31 March 2021 to $226 million on 30 June 2021.
In contrast, the quarterly financing cash flow went from -$44.76 million on 30 June 2020 to $750,000 on 31 March 2021 to -$3.79 million on 30 June 2021. In contrast, the total debt grew from $515 million on 31 March 2021 to $517 million on 30 June 2021.
What Value Does Sportsradar have?
There was some growth at Sportsradar. The Total Assets grew from $1.134 billion on 31 March 2021 to $1.193 billion on 30 June 2021.
Sportsradar is a cheap stock. Mr. Market paid $24.38 for SRAD on 15 October 2021. Hence, Sportsradar is a cheap investment in the sports betting sector. I think Mr. Market fairly priced Sportsradar at $24.38.
Sportsradar is also a good means of investing in sports-betting without investing in a gambling company. Many investors avoid gaming companies because they are riskier. Yet Sportsradar is a company that can profit from betting without taking bets.
I consider Sportsradar AG (SRAD) a risky stock because of its small size and lack of dividends. However, I think Sportsradar could be an interesting play in the sports-betting and Data-as-a-Service sectors. Despite its small size, I think Sportsradar will grow.
If you can live with small amounts of cash and no dividends, Sportsradar is worth a look.
Originally published at https://marketmadhouse.com on October 15, 2021.