Las Vegas GP and Formula 1 peak: is FWONA stock a good buy?

By:
on Nov 17, 2023
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  • The Las Vegas Formula 1 event has not lived to its hype.
  • Hotel and event tickets have not sold as fast as expected.
  • Still, Formula 1 is a good franchise for long-term investors.

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The biggest Formula 1 race of the year is off to a disappointing start. The Las Vegas GP is seeing weaker demand than expected, leading to a sharp decline of ticket prices. Las Vegas hotels still have rooms, and many, including Wynn, have been forced to slash prices. This explains why the Liberty Media Corp (FWONA) stock has fallen by over 8.25% in the past three months.

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Peak Formula 1?

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Formula 1 has been one of the most successful sports franchises in the past few years. After buying it in a $4 billion deal, the company is now valued at over $13 billion. There were also rumours that Saudi Arabia wanted to buy the franchise for over $20 billion.

Recently, however, there have been signs that Formula 1 is losing traction as races get extremely predictable. RedBull Racing has already won the constructors championship while Max Verstappen has won the drivers championship for three straight years.

All this explains why the number of viewers has dropped in the past two seasons. Data shows that the important TV viewership has dropped by 8% from a year ago. Similarly, the number of people watching Drive to Survive has dropped by about 7%. 

A closer look at YouTube metrics shows that highlight views has dropped this year. For example, highlights of the Baku Grand Prix have had 7.2 million viewers, down from 2021’s 14 million and 2022’s 7.9 million. 

Similarly, the British Grand Prix YouTube highlights had only 5.5 million views compared to 2022’s 11 million and 2021’s 5.9 million. The most popular highlights were Bahrain, Australia, and Saudi Arabia with 9.9 million, 8 million, and 9.8 million, respectively. In 2022, the most popular highlights was Bahrain with 12 million views.

There are other signs that Formula 1 is losing traction in the United States. While thousands of fans attended the Miami Grand Prix, the tickets sold at a slower pace than in the previous year.

Unfortunately, there are signs that the next season will be similar since the cars will see no major changes. I suspect that RedBull will continue with its dominance since its successs this year means that the engineers are now focusing on the next car.

Is FWONA stock a good buy?

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Formula 1 stock

Formula 1 tracking stock chart

Formula 1 is, without a doubt, going through a rough patch as its popularity wanes. However, as an entity, the company is doing well as more companies embrace the sport. Firms like Salesforce, Google, American Express, and Amazon have all made huge advertising investments recently.

Its total revenue in the third quarter rose to $887 million from $715 million in the previous quarter. Its operating profit jumped from $82 million to over $132 million. This revenue will continue doing well, helped by race promotion revenue, media rights fees, and sponsorships.

Therefore, there is a likelihood that Formula 1 stock will continue doing well over time. In the past, sports teams and leagues tend to be valued differently. For example, Manchester United (MANU), which generates minimal income, is now valued at over $3 billion. Analysts believe that the club can be sold for over $5 billion.

A likely outcome for Formula 1 is a situation where Liberty Media decides to sell the company. Such a move would be at a higher premium than where the company is today. Saudi Arabia, which is swimming in cash, could allocate about $20 billion for the move. 

This, however, will take years since Liberty Group is in no hurry of exiting its investment. In the past, the company has held companies like SiriusXM, Live Nation, and Atlanta Braves for years.

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