SportBusiness Disputes 42% of Morgan Stanley’s ’18 Formula One Growth Forecast

F1

Morgan Stanley’s 2018 growth forecast for Formula One auto racing (FWONK), projected a $187 million increase in broadcasting revenue. However, 42% of that total has since been called into question after one of the sources cited in the report (SportBusiness) issued statements contradicting several key assumptions. The report assumes FWONK “will see the bulk of their major markets step up with new (larger) TV contracts”, increasing the company’s broadcasting fees 31% YOY (to $785 million); but, SportBusiness is projecting rights fees in Spain (F1’s biggest market) remain flat and has noted Germany does not have a pay-TV operator in place for the start of the 2018 season. When asked if Morgan Stanley would be revising its report in the wake of SportBusiness’ comments, Head of Media Research Ben Swinburne said “these are our estimates, based on a variety of analysis and press reports. I am unable to comment on any potential future changes to our forecast.”

Howie Long-Short: FWONK shares spiked (to over $39) following the release of Morgan Stanley’s report, which included an increased price target ($47); but, the document clearly states that among the risks are “broadcast contracts renewed under less favorable terms.” Assuming SportBusiness projections are accurate, then Morgan Stanley greatly overestimated FWONK’s ability to increase revenue YOY. Shares have steadily declined since SportBusiness issued a statement on Friday, closing at $36.56 on Tuesday.

Fan Marino: F1 has announced it will be replacing its Grid Girls with Grid Kids for 2018 season, a move is designed to drive youth interest in the sport. Grid Kids will be selected by merit or lottery, by their local motorsport clubs; with all those participating actively competing in karting or formulae.

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Author: John Wall Street

At the intersection of sports & finance.

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