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TD Cowen thinks Liberty Formula One Group Class A stock can see big gains going forward. The firm initiated coverage of the auto racing series with an outperform rating and a $90 per share price target, implying upside of nearly 40% from Friday’s close. Analyst Stephen Glagola said because the company is “in the early laps of improving asset utilization of the commercial rights,” there is potential for an additional 15% above consensus estimates for operating income before depreciation and amortization (OIBDA). “FWON’s highly contracted revenue and variable cost structure provide for low execution risk and resilience against a consumer discretionary downturn,” Glagola said. He also noted the company’s lock on commercial rights to the World Championship, which could yield more upside from revenue derived from fees. “Formula One has minimal working capital impacts, low capital intensity, and an efficient tax structure in the utilization of its acquired FIA agreement for commercial rights to the World Championship, driving the ability to earn race promotion fees, media rights, and sponsorship fees (carrying annual escalators that can be repriced at the end of ~3-7 year durations),” Glagola said. “This results in a strong operating ROIC [return on invested capital] profile: we estimate 30% annual avg. over 2019-2022, growing to 41% avg. over 2023-2027.” Formula One Class A shares are up more than 20% year to date. The sport has seen a popularity boom in recent years due in part to the Netflix docuseries “Formula 1: Drive to Survive.” FWONA YTD mountain Formula One Class A stock has notched an impressive 21% gain from the start of the year. — CNBC’s Michael Bloom contributed to this report.
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