Formula 1 target lifted at Morgan Stanley on stronger sponsorship growth

Investing.com -- Morgan Stanley analysts raised their target for Formula 1 stock to $102 from $88 on Friday, citing stronger-than-expected sponsorship growth and steady free cash flow per share.

Despite softer ticket sales for the second Las Vegas Grand Prix, Morgan Stanley (NYSE:MS) highlights the broader benefits of the event to Formula 1's business, stating, "a softer than expected year two Las Vegas Grand Prix should not distract from... the bigger benefit of this event."

They believe Formula 1's 2025 sponsorship pipeline remains robust, bolstering revenue prospects for the coming years.

"We raise F1 forecast modestly on higher sponsorship growth in '25," Morgan Stanley noted, projecting a 1-2% increase in 2026 adjusted EBITDA and forecasting around $3.50 of free cash flow per share by 2026.

They note the Las Vegas Grand Prix, scheduled for November 2024, still has tickets available, with Morgan Stanley indicating Liberty Media expects a year-over-year decline in ticket sales, a common trend for major events in their second year.

However, the event has already catalyzed growth in other revenue streams, with the analysts pointing to "new sponsorship deals that support a big '25 growth year in this area."

Additionally, the firm remains focused on upcoming milestones that could influence Formula 1's financials, including its U.S. rights renewal and the finalization of the new Concorde Agreement, which will outline team payments and other critical agreements for the sport's future.

The updated target for Formula 1 stock reflects Morgan Stanley's optimism about these growth prospects, with a steady increase in sponsorship revenue set to support the sport's value in the years ahead. However, the firm maintained an Equal-Weight rating on the stock.