F1 Paces Sports Stocks in 2021 as Betting Buys Stumble Into New Year
Auto racing stocks paced the JohnWallStreet Sports Stock Index for 2021, as shares of NASCAR track owner Dover Motorsports and Formula One each returned more than 50% in the year. The pair weren’t enough to keep the benchmark sports index from being dragged down in the closing weeks of the year, however, as once red-hot sports betting stocks cratered, with investors growing wary of consumer-focused growth stocks. The Sportico index goes into the end of the year with a 9% gain, well behind the 24% rally of the S&P 500 Index.
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The smallest by market capitalization of the 40 stocks in the index, Dover Motorsports (NYSE: DVD) posted the best return for the year, up 64%, thanks to its pending purchase by Speedway Motorsports. Dover owns two NASCAR tracks, in Delaware and Tennessee, which will be added to the nine stock-car racetracks the O. Burton Smith-owned business already has, including the Atlanta, Charlotte and Las Vegas motor speedways. Speedway is buying out Dover for $131.5 million.
Formula One (Nasdaq: FWONA) posted a 51% return, bolstered by positive sentiment from investors that the Liberty Media-owned showcase is primed for growth, thanks to an expansion of races in the U.S., which will see a Miami grand prix filling out a 23-race schedule next year (F1’s China race will not occur for the third straight year). F1 should also benefit from spending caps Liberty Media is implementing. “Teams will be in a position to be more competitive, so it will make it more interesting in the long run,” said Andretti Autosport owner and retired F1 driver Michael Andretti in a June Sportico interview. “And hopefully they’ll keep manufacturers longer because they don’t have to spend a stupid amount of money.”
Other top gainers in the index for the year including Live Nation (NYSE: LYV, up 56%), bolstered by its Ticketmaster division, which enjoyed the strongest autumn demand dynamics ever seen, according to a CFRA analyst report. Under Armour (NYSE: UAA, up 19%) also gained over 2020, despite a poor December in the stock market, as the apparel marker appeared to benefit from its strategy to get out of costly collegiate sponsorship deals. Competitor Nike (NYSE: NKE, up 19%) gained on strong North American sales, even as China and Latin America business struggled due to supply chain and COVID concerns. Also leading sports shares for the year were Football Hall of Fame real estate developer Hall of Fame Resort & Entertainment (Nasdaq: HOFV, up 42%), Caesars Entertainment (NYSE: CZR, up 27%) and BCE (NYSE: BCE, up 26%), the Canadian media conglomerate and part-owner of Toronto’s major league basketball, hockey, soccer and football franchises.
Even as the JohnWallStreet index is set to wrap up a positive 2020, the primary market story may be the stunning turn of market fortunes for sports wagering shares. The year began bullishly for sports betting stocks, driven by the excitement over the opening of the North American sports gambling market. Shares were led by a first-quarter surge from DraftKings (Nasdaq: DKNG) and Penn National (NYSE: PENN), a casino operator with a large stake in Barstool Sports; both added 57% by mid-March. The two companies now sit among the worst sports stock performers of the year, with Penn down 41% and DraftKings off 35%. Much-ballyhooed betting data newcomers Genius Sports (NYSE: GENI) and Sportradar (NYSE: SRAD) tumbled, too. Genius, hammered by poor earnings outlook reaction, is the worst index performer, down 57% from the start of the year, while Sportradar is off 33% from its September IPO price of $27. Early-year meme stock enthusiasm, of which sports wagering companies benefited, faded and led to a widespread shift to larger, non-sports stocks, said David Russell, vice president of market intelligence at TradeStation Group, a brokerage.
“The market lost interest in speculative companies for various reasons, starting in April. One reason is this sense the Fed accommodation is going to go away; the other is incredible strength in bona fide growth stories like Microsoft and cloud companies,” Russell said in a phone call. “Part of the same narrative are GameStop and AMC. The market really hasn’t been enamored with most consumer stocks. Speculative, emerging, business-to-consumer stocks: struggling. Confirmed, established business-to-business: flourishing.”
With 2021 drawing to a close, 21 of the Sportico index’s 40 components are lower for the year, many weighed down by a poor November, with December basically unchanged. The JohnWallStreet Sports Stock Index finished last year at 1,418.65. It closed at 1,552.19 on Dec. 21. The index is an equal-weighted, 40-component barometer of the sports business. It was reconstituted in August 2020 at 1,000. Over those 17 months, sports stocks have returned more than 50%, besting the S&P’s 41% gain.
The index is rebalanced quarterly, returning all components to an equal 2.5% starting weight and adding and dropping stocks as needed. Joining the index as of Jan. 2, 2022,will be three companies:
Esports juggernaut Faze Clan is going public by a merger with the SPAC B. Riley Principal 150 (Nasdaq: BRPM). The deal values Faze Clan at $987 million and should close in the first quarter of the new year. Faze Clan runs esports teams in 11 games, including FIFA21 and FIFA Online, and claims to have a social media following larger than the NBA’s Lakers and Warriors combined. The company generated $38 million in revenue in 2020 and projects that figure to rise to $650 million by 2025.
Nexstar Media Group (Nasdaq: NXST) is the second-largest local TV broadcaster in the U.S., after index component Sinclair Broadcasting (Nasdaq: SBGI, down 13%). Nexstar has 199 stations in 116 markets and counts local sports rights as a key part of its business model. The company holds rights to Las Vegas Raiders’ preseason games in three states, as well as college sports programs in various markets. Nexstar also broadcasts sports run by national affiliates of its stations, which include the four major broadcast networks. In September, the company launched the SportsGrid Network, a 24-hour sports wagering and fantasy sports-themed channel. That offering is currently in nine markets, including San Francisco and Washington, D.C.
Rounding out the new additions is Esports Technologies (Nasdaq: EBET), a sportsbook with an online gambling platform, licensed in 149 jurisdictions worldwide. The business accepts wagers on MLB, NBA and NFL games as well as videogame contests including FIFA and Rocket League. In a strategy evocative of Sportradar and Genius Sports, Esports Technologies aims to build out trading platforms and exclusive data services around the esports ecosystem. The company held its IPO in April at $6 a share and was trading recently at $18, giving it a market cap of $235 million.
Three stocks are being dropped from the index to start 2022: Scientific Games (Nasdaq: SGMS, up 49%), which sold off its sports betting technology business, OpenBet, to UFC parent and Sportico index component Endeavor (NYSE: EDR, up 13%); Austerlitz Acquisition (NYSE: AUS, down 2%), which had its merger with online sports wagering-focused Wynn Interactive scuttled; and the aforementioned Dover Motorsports.
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