Potential MLB deal elevates Sportradar to-buy rating
Deutsche Bank has issued a buy rating for Sportradar, citing a potential deal with Major League Baseball.
The company’s stock price, which is up nearly US$3 so far this year to just over US$20, will host an investor day on April 1 in New York City.
“We believe the trajectory of margins, and Sportrader’s ability to make progress towards the stated goals will be a key debate in 2025,” said analyst Carlo Santarelli.
“Sportradar recently reiterated that it expects to grow margins with a medium-to long-term margin target of 25% to 30%, compared to 2024 guidance of 19.8% given longer-term visibility on sports rights and the potential benefits from operating leverage.”
Management noted with its third-quarter earnings that it expects to gain operating leverage from all major expense line items in 2025 and beyond given longer-term visibility on sports rights costs.
That includes leveraging the straight-line amortization over the lifetime of the contract and managing the cost infrastructure, Santarelli said.
Deutsche Bank’s 2025 margin estimate is 21.7% (up 175 basis points year-over-year) and its 2026 margin estimate is 23.2% up 155 basis points year-over-year).
Santarelli said they view the potential MLB deal as a key item heading into 2025. Sportradar remains optimistic that it will prolong its relationship with the MLB while also noting that the deal should be margin accretive and allow for 2025 year-over-year margin expansion.
“Management is excited for the opportunities outside of the U.S market such as Taiwan, Korea, and Japan,” Santarelli said. “By leveraging its technology, computer vision, and tracking, we view Sportradar as well positioned to enter these targeted markets. We believe the announcement of an MLB deal could be a catalyst for shares in 2025.”
Sportradar has “one of the most attractive growth profiles in our coverage universe over the next couple years,” Santrelli said. They expect Sportrader to grow EBITDA 23% year-over-year in 2025 and 17% in 2026.
“This compares to 2025 growth for Las Vegas / Macau, for stocks across our coverage universe, of 2% year-over-year,” Santarelli said. “Regional Gaming of 6% year-over-year (inclusive of Penn’s 30% growth given the digital inflection), Gaming REITs 3%, and lodging C-Corps 5%. With growth scarce across our universe, we view a key for Sportradar as investor willingness to continue to pay a premium for growth in 2025.”
The downside risks are data and streaming rights inflation as competition increases both among existing data providers and potential new entrants that could result in loss of key contracts or lower profitability; disintermediation whereby key leagues collect and distribute raw data to large operators or whereby large operators bring in-house in-play pricing for key leagues; unfavorable regulation both domestically and abroad that could curtail growth by reducing total area market; rapid industry consolidation in the U.S. that will result in fewer operators not needing all their products and services; and exposure to the Russia and Ukraine conflict.
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