F1: Stock upgraded to buy at Citi

Jason Bazinet, Citigroup (Citi) managing director, joined ‘Power Lunch’ to discuss Liberty Media Formula One being upgraded from neutral to buy.

Citi maintained their 12-month price target of $71.00 on the stock as analysts at the firm believe that recent concerns about the Vegas Grand Prix and disappointing US sports rights renewals are overblown.

“We believe investors have become incrementally more nervous about the Vegas Grand Prix,” they write.

The concerns are primarily due to the company’s upward revision of the capital expenditure forecast, which has gone up from approximately $270 million to around $400 million.

Despite this extended payback period of roughly 3 years resulting from Formula One’s new capital expenditure guidance, Citi maintains a positive outlook. They believe that the Vegas event has the potential to significantly boost media rights revenue and, in turn, improve US engagement, effectively offsetting concerns about the additional capital expenditure.

Reports suggest Apple (NASDAQ:AAPL) may get exclusive global rights for Formula One in the next five years. This could add about $9 per share in value to FWONA by 2028. If this happens, FWONA stock could go up by around 10%. But if it doesn’t, Citi expects that the stock may drop by about 5%.