On Wednesday, Citi updated its stance on Sportradar Group AG (NASDAQ:SRAD) shares, increasing its price target from $18.00 to $20.00 and maintaining a Buy rating. The adjustment reflects a shift in valuation methodology, transitioning from a revenue multiple to a free cash flow (FCF) multiple as Sportradar is expected to generate more significant FCF.
The firm's new valuation is based on projections into 2025, marking a change from the previous year's forecast. This update implies a valuation of approximately 27 times Sportradar's anticipated 2025 FCF. The revision comes alongside Citi's updated estimates, which are now aligned with a longer-term outlook.
Citi's analysis highlights three key strengths of Sportradar: the company's competitive position, its integral role in the sports betting value chain, and the expanding global sports betting market. These factors underpin the confidence in the company's future performance and justify the maintained Buy rating.
Sportradar's role as a provider of sports data and content is crucial within the sports betting industry. Citi's positive outlook is further bolstered by the expectation of the company's increasing ability to generate free cash flow, a significant metric for investors.
The updated price target and sustained Buy rating indicate Citi's optimism about Sportradar's prospects. The firm's strategic position and the growth trajectory of the sports betting sector support the analyst's positive assessment.
In other recent news, Sportradar Group AG reported a strong third quarter with a 27% year-over-year increase in revenues, reaching €255 million, and a 30% rise in adjusted EBITDA to €66 million. These robust results were driven by significant growth in Betting Technology & Solutions and Managed Trading Services.
The company also raised its full-year revenue and adjusted EBITDA guidance, indicating strong operational momentum and strategic initiatives geared towards future growth.
Sportradar's free cash flow surged by 140% year-to-date, with a net retention rate of 126%. The company also reported a profit increase to €37 million from €4 million in the previous year, aided by foreign currency gains. In addition, Sportradar confirmed expectations for higher EBITDA margins in 2025, targeting 25% to 30%.
The company is also optimistic about growth in the Brazilian market and ongoing sports partnerships. Sportradar is focusing on capital allocation for long-term growth and considering share repurchases. The pending acquisition of XLMedia is expected to enhance revenue and cost synergies, further strengthening Sportradar's position in the sports betting and entertainment market. These are among the recent developments that investors should note.
InvestingPro Insights
Citi's optimistic outlook on Sportradar Group AG (NASDAQ:SRAD) is further supported by recent data from InvestingPro. The company's revenue growth of 26.55% over the last twelve months as of Q3 2024 aligns with Citi's positive view on Sportradar's competitive position and the expanding global sports betting market. This growth is complemented by a strong EBITDA growth of 54.27% over the same period, indicating improved operational efficiency.
InvestingPro Tips highlight that Sportradar holds more cash than debt on its balance sheet, which could contribute to the company's ability to generate significant free cash flow as projected by Citi. Additionally, analysts anticipate sales growth in the current year, reinforcing the positive outlook on the company's future performance.
The stock's recent performance has been particularly strong, with a 72.42% price total return over the past year and trading near its 52-week high. This aligns with Citi's increased price target and maintained Buy rating. However, investors should note that the stock is trading at a high P/E ratio of 80.75, which may reflect the market's high expectations for future growth.
For readers interested in a more comprehensive analysis, InvestingPro offers 15 additional tips for Sportradar, providing a deeper insight into the company's financial health and market position.
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