Genius and Fubo Lead Sports Stocks in May as Broadcasters Tumble
Sports stocks edged lower in May as general market uncertainty and an advertising slump helped draw down the Sportico Sports Stock Index by 3%. The 40-stock index, which reflects the strength of sports and sports-related businesses, closed May at 1,125. Even though the index closed the month slightly lower, it is still up 7% for the year to date.
Advancing stocks were led by Genius Sports (GENI) and Fubo (FUBO), which showed that even in a mixed market, investors will buy when companies show good execution.
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“We have always led this very large media space, strategically speaking, being first to say sports is key to be able to drive acquisitions [but] … we don’t really get credit for strategy and execution, and those are the two most important components in media,” Fubo founder and CEO David Gandler said in a call with Sportico two weeks ago. The streaming service finally seems to be getting credit from Wall Street, after it showed a 22% year-on-year subscriber increase in the first quarter, thanks in part to its robust sports programming offerings, including a much-criticized decision to add 19 Diamond Sports RSNs to its regional bundles. Shares in Fubo gained 37% in the month to close at $1.56, enough to be the second-best component of the index.
Sports data and analytics provider Genius Sports led all sports stocks higher, advancing 54% to $5.71 as it reported better-than-expected quarterly earnings and raised its estimates for sales for all of 2023. Genius expects 2023 revenue to hit $400 million, driven by U.S. sports betting and graphics and media gains with its Second Spectrum division. Competitor Sportradar (SRAD) also had a positive May, adding 4% to its share price after it reported a strong first quarter. Overall, 14 of the 40 stocks in the sports stock index rose in May. Scoreboard maker Daktronics (DAKT, up 30%), Live Nation (LYV, up 18%) and Aramark (ARMK, up 14%) were other notable gainers.
The difference between the gains in Genius and Sportradar shows how finicky the stock market continues to be. While Sportradar bested Genius in percentage sales gain in the first quarter, Genius’ ability to raise 2023 guidance in May was taken more bullishly by market participants, even as Sportradar was able to confirm its early sales guidance. Still, relative to other sports stocks, Sportradar was a strong performer, as investor reactions to other companies’ results showed that anything short of full-throated bullishness from companies leads to sell-offs.
In contrast to Fubo’s gains, the worst performer of the Sportico Stock Index was Paramount (PARA), which lost 34% of its share price after saying that a return to profitability won’t happen before 2024 as the company seeks to establish more of a foothold in streaming. Paramount, which owns CBS and has streaming-first programming for UEFA Champions League soccer among other sports offerings, “faces the incumbent-provider quandary of how to move to a new business model, in this case streaming video, without cannibalizing the legacy model or going broke in the process,” said Argus analyst Joseph Bonner in a research note. While the company may need to acquire—or be acquired by—another streaming service to get the scale to compete with Walt Disney (DIS, down 14%), sports will likely remain central to Paramount’s business model. “We have long viewed sports as an important differentiator for Paramount+ relative to Netflix and other smaller competitors,” Bonner said.
Paramount joined the other eight traditional broadcasting businesses in the index in seeing share prices decline in May. Like Paramount, Disney was also hurt by reporting losses in its direct-to-streaming business, in which ESPN+ is a foundational offering. Other broadcasters were hurt more by an ongoing advertising recession, which is crimping current sales and tamping down expectations for the full year. Sinclair Broadcasting Group (SBGI), which owns the Tennis Channel and, for the moment, the majority of Diamond Sports Group, was the second-worst performer, losing 21% as ad revenue dropped sharply in the first quarter, the results of which it also reported in May.
The Sportico Sports Stock Index is an equal-weighted 40-stock index that debuted in August 2020 at 1,000. The index is rebalanced quarterly, meaning every stock resets to a 2.5% weighting. To be included in the index a business must be wholly or significantly reliant on sports for its growth and trade in sufficient volume on a U.S. exchange.
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