Voss Capital, LLC an investment management company, released its first-quarter 2024 investor letter. A copy of the letter can be downloaded here. Voss Capital’s funds, Voss Value Fund, LP, and the Voss Value Offshore Fund, Ltd returned +9.2% and +9.0% to investors net of fees and expenses respectively, in the first quarter compared to a +5.2% return for the Russell 2000 Index, 2.9% return for the Russell 2000 Value Index, and +10.6% return for the S&P 500 Index. The fund’s total gross exposure stood at 167.8% and the net long exposure was 92.9% at the end of the first quarter. The weight of the fund’s top 10 longs was 81.1% and the top 10 shorts was 24.2%. In addition, you can check the top 5 holdings of the fund to know its best picks in 2024.
Voss Capital highlighted stocks like Genius Sports Limited (NYSE:GENI) in the first quarter 2024 investor letter. Genius Sports Limited (NYSE:GENI) develops and distributes technology-led products and services to the sports, sports betting, and sports media industries. Genius Sports Limited’s (NYSE:GENI) one-month return was -3.85%, and its shares lost 16.96% of their value over the last 52 weeks. On May 31, 2024, Genius Sports Limited (NYSE:GENI) stock closed at $5.24 per share with a market capitalization of $1.105 billion.
Voss Capital stated the following regarding Genius Sports Limited (NYSE:GENI) in its first quarter 2024 investor letter:
“Genius Sports Limited (NYSE:GENI) is a sports data rights aggregator that provides live sports data to sports books covering over 200,000 events globally. GENI has locked up the official data rights to leagues like the EPL, FIBA, MLB, and most importantly the NFL through at least 2028. GENI’s technology is primarily focused on collecting, managing, and distributing real-time sports data and analysis during games to various stakeholders such as sportsbooks, media companies, and sports leagues, a duopolistic industry overall that they share with Sports Radar, however each company typically has exclusivity in the sports or leagues that they contract with. The company is well positioned to continue to benefit from increased sports betting legalization and the growth of in-game betting in the US, regardless of which sportsbook(s) ultimately command the most market share. We expect the company to maintain >20% organic revenue growth with >50% incremental EBITDA margins over the next few years. If correct, we believe we are paying < 10x 2027 FCF at today’s market prices.
GENI’s new BetVision was only recently launched in September 2023, and it enables in-game bets for the NFL with low latency as well as calculating and displaying real-time analytics and odds. In-game betting makes up 25% – 30% of bets in U.S. football vs 80%+ in the more mature UK soccer betting market. We believe NFL games, which comprised 96 out of the top 100 viewed television programs last year, lend themselves even more to in-game betting with more potential variables/events than soccer. Key to the thesis is that GENI’s take rate for in-game bets (5% – 6%) is 3x higher than the take rate on facilitating pre-game bets (1.5% – 2.0%) and comes at zero incremental cost to GENI, thus is highly margin accretive with a long runway for increased penetration to catch up to more mature regions like the UK:
“As we continue to increase the in-play betting, we directly benefit from this higher revenue share at no incremental cost, therefore, contributing to our profitability at near 100% margin.” – GENI November 13th, 2023 earnings call
It is notable that GENI has beaten and raised guidance for the last nine quarters in a row, establishing near bulletproof credibility in our minds that management does what they say will do, and yet the market remains highly skeptical of their visibility on rights costs and the scalability of the NFL and UK soccer rights that GENI pays for and recently extended, thus creating the attractive buying opportunity recently.
Our base case price target of $11.00 (>110% upside) by late 2026 uses 12x 2026 EBITDA. 12x seems conservative in the context of what we anticipate being a 40%+ EBITDA CAGR over the next few years and ultimately a 30%+ EBITDA margin business at maturity in a duopolistic industry structure. Longer term, we believe the upside is much greater.”
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Genius Sports Limited (NYSE:GENI) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 28 hedge fund portfolios held Genius Sports Limited (NYSE:GENI) at the end of the first quarter which was 31 in the previous quarter. Genius Sports Limited (NYSE:GENI) posted first-quarter revenue of $120 million, up 23% year over year, above guidance of $117 million.
In another article, we discussed Genius Sports Limited (NYSE:GENI) and shared the list of best gambling stocks to buy. In addition, please check out our hedge fund investor letters Q1 2024 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
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