Formula One (FWONK)  $95

Industry/Sector/Type -  - - Formula One Racing/Entertainment/Branding &IP

Biggest catalyst for the stock - Liberty One’s acquisition of Formula One could pave the way for sustainable growth.

Positives

FWONK and FWONA have strong, unique, long-term commercial rights to Formula One and MotoGP, (Motorcycle counterpart) both with strong global moats.

The MotoGP acquisition can jumpstart the business with a seasoned partner like Liberty’s expanding global audiences with better sponsorship and events.

Liberty has a strong record of leveraging social media to increase and improve engagement.

The new structure allows management to focus solely on racing assets.

Valuation will likely remain high because of its moat - NASCAR is the only real comparable, but it's in the US, and doesn’t encroach on Formula 1.

Negatives

Debt financing is high at $3Bn but management is focusing on de-leveraging in the next few years.

FWONK is valued at over 25x EV/EBITDA compared to NASCAR’s 10-12x, and it paid 18x for the MotoGP acquisition, so the stock is expensive compared to peers and other media/entertainment companies, especially when sales and earnings continue to grow in moderation.

Sales growth is estimated at a low 7-8% and EPS around 12-14%.

FWONK can be a good defensive stock, its unique moat of being the Formula One racing owner ensures sustainable and recurring revenue without competition, but given the premium valuation, I’d expect limited appreciation in the 10-12% range.