UBS has initiated coverage of Liberty Formula One with a Neutral rating and a 12-month price target of $85, offering a 6.93% upside from its current price of $79.49.
According to UBS analysts, while Formula One has seen substantial growth in recent years, driven by its expanding popularity outside of Europe, future growth may decelerate.
“We expect a decelerating trend going forward given lower operating leverage on team payments and less upside to race promotion in the near term,” the analysts wrote.
UBS expects revenue and operating income before depreciation and amortization (OIBDA) for Formula One to grow at compound annual rates of 8% and 12%, respectively, from 2024 to 2026, slightly below previous periods.
“While the multiple is near the low end of the historical range, we believe this is justified amid more normalized growth,” the analysts added.
A key potential catalyst lies in Liberty’s planned acquisition of MotoGP, a deal valued at around $4.5 billion. UBS highlighted that this acquisition is expected to close by the end of 2024 and could open up new opportunities in underpenetrated markets, especially in the U.S.
Despite these developments, UBS remains cautious, citing the balanced risk-reward dynamic for the stock, stating, “We believe a more recent average better aligns with the decelerating growth outlook.”
Shares of Liberty Formula One were trading around $79.58 on Thursday afternoon.