Formula 1 Stock Target Increased at Benchmark Despite Weak Results

Benchmark analysts have increased their price target for Formula One Group (FWONA) stock from $77 to $81 in a note released on Friday, while maintaining a Buy rating and extending their projection to 2025.

The firm explained that the updated price target is based on Benchmark’s growth relative to the S&P 500 through a discounted cash flow approach, without assigning any specific premium to the unique scarcity value of Formula 1 as a sport.

Despite some financial metrics falling short of expectations, Benchmark remains optimistic about the stock’s potential. They highlighted that the recent season has featured highly competitive races, with seven different winners from four teams over the course of fourteen races in 2024. This competitiveness has led to increased fan engagement, resulting in 3.7 million attendees and record turnout at events such as the Canadian Grand Prix. Viewership on television has also surged in key markets, including the U.S., China, Australia, Canada, South Africa, and the Middle East, with five races in the U.S. achieving record viewership.

Nevertheless, Benchmark pointed out that the financial results were mixed. Formula One Group’s revenues, which include the impact of the Quint acquisition, increased by 36% to $988 million, falling slightly short of Benchmark’s estimate of $1.01 billion. Adjusted OIBDA (EBITDA) grew by 17% to $165 million, missing the consensus estimate of $227 million. Excluding Quint, F1’s operating revenues rose by 20% to $871 million, accompanied by a modest 3% rise in Adjusted OIBDA.

Additionally, Benchmark noted that Liberty Media is addressing regulatory challenges, including a Department of Justice investigation regarding the rejection of Andretti Global as an 11th team. Despite these challenges, Liberty Media CEO Greg Maffei has expressed confidence that Formula 1 has not violated any antitrust regulations. In other developments, Benchmark mentioned that the MotoGP transaction is progressing smoothly, with regulatory approvals expected to be finalized by year-end.