Genius Sports Plunges Despite Q3 Revenue Growth, Higher Top Line Forecast

Posted on: November 23, 2021, 10:31h. 

Last updated on: November 23, 2021, 05:35h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Shares of Genius Sports (NYSE:GENI) are probing new lows Tuesday. That’s after the sports betting data provider reported a wider-than-expected third-quarter loss, prompting investors to overlook revenue growth and guidance for the remainder of 2021.

Genius Sports
Genius Sports slides on the New York Stock Exchange. Revenue outlook is strong, but Q3 loss was wider-than-expected. (Image: Yahoo! Sports)

In midday trading, Genius is off 27.43 percent on volume that’s already more than six times the daily average. During the September quarter, the company lost 37 cents a share on revenue of $69.14 million Analysts expected a loss of 12 cents on sales of $62.79 million.

The glum reaction by investors to the report could be a sign market participants are losing patience with sports betting companies that, while delivering impressive top line growth, aren’t close to being profitable.

In recent weeks, investors are taking sports betting equities to task. For example, Genius is off 25 percent over the past month, while rival Sportradar (NASDAQ:SRAD) is down 11 percent over just the past week. DraftKings (NASDAQ:DKNG) is down 20.21 percent over the past month, while Penn National Gaming (NASDAQ:PENN), parent of Barstool Sportsbook, is lower by 29 percent over the same span.

Genius Revenue Outlook Strong

Investors searching for any bit of good news in the Genius report can focus on the top line. In the third quarter, the data provider’s sales surged 70 percent. The company also boosted its full-year revenue outlook from $257 million to $262 million from $255 million to $260 million. That’s the second time since May the company lifted its 2021 revenue outlook.

We anticipate continued strong revenue growth as the market continues to expand and evolve, while preserving the option to reinvest in the business to fund strategic growth initiatives and drive long-term sustainability and scale,” said CFO Nick Taylor in a statement.

Of the company’s $69.14 million in third-quarter revenue, $43.64 million was derived from betting technology services.  The remainder came from sports and media content, technology, and services. There is some silver lining in the betting technology report because it shows Genius has some pricing power – a point investors are pondering when it comes to this company and Sportradar.

“Growth in the business was driven by price increases on contract renewals and renegotiations with existing customers, powered by our official rights strategy, expansion of value-add services, and new service offerings. Growth was also supported by new customer wins and increased utilization of our available content,” according to the company.

On Monday, Genius announced it’s expanding its relationship with FanDuel to include coveted NFL data.

Another Sports Betting SPAC Collapse

Despite the encouraging revenue forecast, Genius is the latest example of a sports wagering equity that’s faltering following a blank-check merger.

The firm came to market via a merger with special purpose acquisition company (SPAC) dMY Technology Group, Inc. II (NYSE:DMYD) — a transaction valuing the data outfit at $1.5 billion. The stock is down 61.59 percent from its prior highs.

DraftKings, Golden Nugget Online Gaming (NASDAQ:GNOG), and Rush Street Interactive (NYSE:RSI) are other examples of iGaming or sports wagering companies that came to market via SPAC mergers. Of that group, RSI is closest to its 52-week high, residing 27.61 percent below that price.