- Recent stock weakness may be linked to prediction markets, but there’s more to the story
- Analyst sees Genius’ NFL relationship as “advantageous” in rising prediction markets scenario
Shares of Genius Sports (NYSE: GENI) are off 4.26% over the past month, and while that decline isn’t as steep as those experienced by sportsbook clients, it’s a sign investors reacted to soaring prediction markets volume. At least one analyst sees opportunity for Genius in the event contracts space.
In a new report to clients, B. Riley analyst Josh Nichols says there’s room for data providers like Genius to benefit from the rise of prediction markets, particularly when factoring in the popularity of those exchanges in California and Texas – states where sports betting isn’t legal. Those are the two largest states by population, and their total addressable market (TAM) prospects likely aren’t factored in Wall Street’s forecasts on Genius, argues Nichols.
Management has indicated that current licensing economics for prediction market operators would likely be incremental, but the strategic implications extend beyond pure-play prediction platforms,” observes the B. Riley analyst.
Nichols reiterated a “buy” rating and a $14 price target on Genius, implying upside of approximately 23% from current levels.
Sportsbooks’ PM Push Could Boost Genius Sports
Although it’s spreading its wings with advertising and artificial intelligence (AI) offerings, both of which are expected to be long-term growth drivers, providing data to sportsbook accounts for the bulk of Genius’ revenue.
The expansion of prediction markets doesn’t necessarily harm that revenue stream because old guard sportsbooks are moving into the event contracts arena. DraftKings (NASDAQ: DKNG) recently announced the acquisition of Railbird Exchange, and FanDuel notched a deal with CME Group (NASDAQ: CME). Other Genius sportsbook clients are, at a minimum, monitoring the event contracts space.
“Traditional sportsbook operators are actively entering the prediction market category, creating multiple pathways for data monetization via federally regulated product offerings,” adds Nichols.
The analyst also points out that the NHL recently reaching agreements with prediction market giants Kalshi and Polymarket could pave the way for data agreements beyond those already in place with sportsbooks. That could benefit companies like Genius and Sportradar (NASDAQ: SRAD).
Genius NFL Relationship Could Help, Too
With the arrival of football season, Kalshi volume is exploding, and by some estimates, 90% of its turnover is derived from sports event contracts. It’s not a stretch to say most of that is generated from NFL games.
Kalshi recently added parlays and other contracts to its suite of NFL offerings. That could benefit Genius over the long run because parlays, particularly same-game fare, are data-intensive, and Genius holds exclusive data rights with the NFL. The league is the data provider’s largest noninstitutional shareholder.
“GENI’s market positioning also proves uniquely advantageous through its exclusive NFL data partnership and equity stake alignment, enabling real-time data for parlays and in-game betting that account for a growing percentage of betting volume,” concludes Nichols.
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