Citi analyst Jason Bazinet downgraded Formula One (NASDAQ:FWONA) shares to Neutral from Buy with a $65.00 per share price target (up from $61.00).
The analyst sees much of the upside being priced in at current levels while continuing to see F1 as “a compelling asset that will benefit from healthy top-line growth.”
“We believe the company has positioned itself to see improved monetization, driven by growing popularity of the sport, additional races each year and higher monetization per race,” Bazinet said in a client note.
Along these lines, the analyst expects to see record financials that will exceed pre-pandemic levels. However, these results are already priced in with shares trading at an all-time high.
“We attribute this to: 1) expectations for record revenue, adj. EBITDA, and FCF, 2) strong visibility given the contractual nature of the business, and 3) investors rotating into defensive stocks given fears of a potential recession. Along with record financial performance and the removal of a tracker discount, we estimate investors would need to ascribe a 2023 FCF or adj. EBITDA multiple that exceeds pre-pandemic levels in order to see upside above 15%. As such, at prevailing levels we believe the risk/reward looks fairly balanced.”
Formula One stock is down over 2% in premarket Monday.
By Senad Karaahmetovic