The Formula 1 (F1) championship has delivered some of the most thrilling racing action in the world for 73 years, and the sport is currently bigger than ever going by fan attendance and financial success.
Media conglomerate Liberty SiriusXM Group acquired F1 in 2016, and it has accelerated the sport's popularity by making it more accessible to fans than ever before. Liberty owns several sporting and entertainment assets, so it has extensive experience engaging the public and scaling brands on the global stage.
Investors can take a direct ownership stake in F1 by purchasing shares in Liberty Media Formula One(NASDAQ: FWON.A)(OTC: FWON.B)(NASDAQ: FWON.K). I'll break down the three classes of shares later in this piece, but each of them soared in early October following reports that tech giant Apple (NASDAQ: AAPL) put in a major bid for the sport's broadcast rights.
Below, I'll outline why F1 stock is a buy right now, whether Apple comes on board or not.
Formula 1 is on an incredible growth trajectory
Formula 1 has come a long way since its inaugural championship in 1950, when just six races (plus the Indianapolis 500) were on the calendar. This year, 10 teams and 20 drivers are competing in a record-high 23 races for Formula 1 racing glory (though Max Verstappen and Red Bull have already sealed the driver and constructor championships).
Advancements in travel and logistics have made the world smaller than ever, so those races are run across the Asia Pacific, Middle East, Americas, and Europe regions, which makes F1 a truly global spectacle -- and a global business. An all-time high 5.7 million fans physically attended races throughout last year, and as the calendar continues to grow, the sport will have more opportunities to generate revenue.
F1 visited Miami for the first time in 2022, and it added Las Vegas to the calendar in 2023. Next year the sport will host 24 races with the return of the Chinese Grand Prix, which hasn't been run since 2019 (before the pandemic).
A number of the world's largest automotive giants are already involved in F1, from Mercedes-Benz to Ferrari to Aston Martin. But thanks to the sport's growth -- especially in the U.S. -- other manufacturers are racing to get in on the action. Ford will join F1 as the engine manufacturer for the Red Bull Racing team in 2026, and Audi will join the team currently branded as Alfa Romeo in the same year.
As I touched on earlier, fans are more engaged than ever, with behind-the-scenes access across broadcast coverage, social media, and Netflix's Drive to Survive series. The latter program first aired in 2019 and covered the action from the 2018 season, including significant amounts of footage fans wouldn't normally see in the live broadcast each weekend. It turned a fast-paced sport into a mix of drama and comedy, reeling in hordes of new enthusiasts.
Apple could add rocket fuel to the Formula 1 growth story
Wall Street analysts predict Formula 1 will deliver $3.25 billion in revenue in the 2023 full year, which is substantially more than the $1.78 billion it generated when Liberty officially sealed its acquisition in 2017. It would also represent a 26% increase from 2022, thanks to the Las Vegas Grand Prix which could haul in $500 million in revenue on its own this coming November.
Formula 1 generates most of its revenue in three ways, which were broken down as follows last year:
- Media rights fees (broadcast and streaming rights) accounted for 36.4% of 2022 revenue;
- Race promotion (ticket sales) accounted for 28.6% of 2022 revenue; and
- Sponsorship fees accounted for 16.9% of 2022 revenue.
The media broadcasting piece is clearly the largest, and F1 currently holds a long-term deal with Sky Sports. Sky broadcasts F1 in 80 markets around the world, and it will do so until 2029 in primary regions like the United Kingdom, and until 2027 in some secondary regions across Europe. ESPN has a three-year deal to broadcast F1 in the U.S. which expires in 2025, though the network will only show up to 16 races per season.
The financial terms of the deals going forward are undisclosed, but if media rights continue to account for 36.4% of total revenue, it's reasonable to expect they could be worth in excess of $1 billion per year.
But according to Sports Illustrated (which cites Business F1 Magazine), $2.8 trillion tech giant Apple could enter the F1 broadcast scene with a bang. The company is said to be preparing a bid worth a whopping $2 billion per year for the global rights to F1, following the recent success of its 10-year, $2.5 billion deal for Major League Soccer.
Image source: Getty Images.
With or without Apple, Formula 1 stock might be a buy
If Apple submits a bid of that magnitude, it could potentially double F1's current media rights revenue, which is why Liberty Media Formula One stock has jumped 11% since the rumors started swirling at the beginning of October.
But the sport is on such a solid growth trajectory that investors should consider buying the stock regardless. Plus, simply knowing Apple is in the mix will probably elevate the long-term value of F1's broadcast rights to all future suitors.
As I mentioned at the top, there are three classes of Liberty Media Formula One stock. The Class A shares trade under the ticker FWONA, and they come with voting rights attached to give shareholders a say in company affairs. The Class B shares (FWONB) are mostly owned by management and trade with very little volume on the over-the-counter market.
The Class C shares, which trade as FWONK, are the best bet for most investors. They directly track the performance of the Formula One Group without voting rights, so shareholders can sit back without worrying about weighing in on corporate issues, which are sometimes complex.
Whether Apple comes along for the ride or not, the future of Formula 1 looks incredibly exciting, and investors should consider buying in.
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Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple and Netflix. The Motley Fool has a disclosure policy.
