On Friday, Benchmark, a financial analysis firm, increased its price target for Liberty Media Corp-Liberty Formula One (NASDAQ:FWONA) to $102 from the previous $81, while maintaining a "Buy" rating on the stock. This adjustment reflects a positive outlook on the company’s future, particularly in relation to its recent activities and market trends.
The stock has shown remarkable momentum, with a 46.9% year-to-date return and currently trading near its 52-week high of $87.42. According to InvestingPro analysis, the company currently appears overvalued relative to its Fair Value estimates.
The upgrade comes in the wake of Liberty Media’s announcement yesterday afternoon regarding the European Commission’s decision to initiate a Phase II investigation into its acquisition of MotoGP. The company’s press release emphasized the potential benefits of the transaction for MotoGP, its fans, and the European motorcycle industry. With a robust market capitalization of $21.37 billion and strong financial health metrics according to InvestingPro, Liberty Media appears well-positioned to pursue strategic acquisitions.
Benchmark’s revised price target is based on several key factors. Firstly, the firm has removed a 10% complexity discount, acknowledging the simplification of Liberty Media’s structure through ongoing spin-offs, including for Liberty Live. Additionally, the target considers the strong global demand for sports assets, with increased financial interest from private equity and sovereign wealth funds.
The analysis by Benchmark includes a projection for a 50% steady state growth premium over the market, an increase from a previous estimate of 30%. This implies an adjustment in the expected post-2027 adjusted EBITDA growth rate to 6%, up from 5.2%.
Despite this increase, the anticipated growth rate remains conservative compared to the 15% compound annual growth rate Benchmark expects for Liberty Media from 2023 through 2027.
In other recent news, Liberty Media has extended the deadline for the acquisition of a major stake in Dorna Sports, the company behind MotoGP racing, to March 31, 2025.
This decision follows the initiation of a detailed Phase II review of the transaction by the European Commission. The acquisition, which is a significant expansion for Liberty Media, is part of its strategic expansion in sports and entertainment.
Simultaneously, Liberty Media’s Q3 earnings call revealed a robust financial performance, particularly for its Formula One group, which reported a 15% increase in revenue and a 21% rise in adjusted OIBDA. The company also disclosed its expectation to close the MotoGP acquisition by year-end, with debt leverage ranging between 3.5 to 4 times.
Furthermore, the European Union is set to investigate Liberty Media’s acquisition of the MotoGP World Championship, a deal valued at $3.67 billion. Officials from the EU’s antitrust division have raised concerns over potential reduced competition in the broadcasting and streaming markets.
Lastly, Liberty Media announced plans for year-round activities in Las Vegas starting in late Q1 2025, aiming to engage new fans. The company also sees a strong sponsorship growth for F1 in 2025 and a healthy pipeline for 2026.
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