Formula One Group (NASDAQ:FWONK) shares slipped nearly 2% in early trading on Monday as Morgan Stanley downgraded the motorsport company amid worries about a decline in sports media rights.
“Recent sports renewals including NASCAR, the EPL, and WWE’s Smackdown have all come in lower than expected,” analysts, led by Benjamin Swinburne, wrote in an investor note. The analysts lowered their rating on Formula One Group (FWONK) shares to equal-weight from overweight and cut the price target to $70 from $80.
The analysts added that while interest rates have played a role in the decline in media rights, the continued pressure on linear networks and sports broadcasters (including Disney’s (DIS) ESPN) are “primarily to blame,” as they have less ability to spend “aggressively on rights.”
“Ultimately rights holders face a growing dilemma between maximizing reach and coverage through linear network distribution and maximizing revenues,” the analysts continued, referencing the recent NASCAR agreement with Amazon (AMZN) and Warner Bros. Discovery (WBD).
With the NASCAR deal only resulting in roughly between 3% and 4% growth on a compound annual basis, Morgan Stanley has concerns about Formula One Group (FWONK), given that it has a “premium multiple” and there is the likelihood that the business slows and markets worry about “strong broadcast revenue growth.”
Analysts are largely bullish on Formula One Group (FWONK). It has a BUY rating from Seeking Alpha authors, while Wall Street analysts rate it a STRONG BUY. Conversely, Seeking Alpha’s quant system, which consistently beats the market, rates FWONK a HOLD.
Formula One Group slips as Morgan Stanley downgrades on worries over sports rights
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