Formula 1 (F1) racing officially started in 1950. The sport has a rich history, but it soared to new heights when it was acquired by Liberty Media in 2016 for $4.6 billion. The media giant placed a heavy focus on fan engagement, expanding the racing calendar, and attracting big-name sponsors.
F1 generated a record amount of revenue in 2023, but the 2024 season will feature a record number of races, which should drive the sport's financial results to new heights. Investors can buy a stake in F1 through Liberty Media Formula One(NASDAQ: FWON.A)(OTC: FWON.B)(NASDAQ: FWON.K) stock. Here's why that could be a fantastic move.
Image source: Getty Images.
2024 looks very promising already
F1 is a global sport that travels to Europe, Asia, the Middle East, and the Americas every season. Race weekends are normally a three-day affair, with 10 teams fielding 20 cars to compete for championship points. Those teams represent some of the world's leading automotive manufacturers, including Ferrari, Mercedes-Benz, Aston Martin, and McLaren (to name a few).
F1 teams are a hot property right now thanks to the success of the sport, and brands are clamoring to get involved. Ford will join the sport's current dominant team, Red Bull Racing, as an engine supplier in 2026, and German car giant Audi will take over the existing Sauber team entirely in the same year.
There were 23 F1 races scheduled for the 2023 season, equaling the 2022 calendar. However, even with one event canceled due to extreme weather (in Emilia Romagna, Italy), 6 million fans attended races throughout the season, which was a 5% year-over-year increase.
That momentum appears to have carried into 2024. Three races are in the books so far, and the most recent event in Melbourne, Australia drew a record 452,055 attendees, which was 7,424 more than a year ago.
There are 24 races on the calendar this season, which is a new record. The Chinese Grand Prix will return for the first time since 2019 following a pandemic-related absence, and the two newest races in Miami (introduced in 2022) and Las Vegas (introduced in 2023) will make a return. Last season's attendance numbers will almost certainly be eclipsed by the end of this year.
Formula 1 could deliver a record amount of revenue in 2024
Formula 1 generates revenue in three main ways:
- Media rights fees account for 32.2% of revenue. They include TV and streaming deals.
- Race promotion accounts for 29.3% of revenue. It includes ticket sales.
- Sponsorship fees account for 18% of revenue. Each race typically has a headline sponsor with naming rights, but the sport creates a number of opportunities for brands to get involved.
F1 generated a record-high $3.22 billion in total revenue during 2023, which was a 25% increase compared to 2022. The new Las Vegas Grand Prix was a big contributor to the result; while Liberty didn't specify exactly how much revenue it generated, it drove a 42% increase in F1's "other" revenue, which isn't captured under the three categories listed above.
In this case, the $196 million jump in "other" revenue refers to hospitality and experiences largely attributed to the Vegas event. F1 wasn't the only beneficiary, either -- the race had a whopping $1.2 billion economic impact on the Vegas community.
Although the season just started, Wall Street thinks Formula 1 will set another revenue record in 2024 with $3.74 billion coming through the door. That would represent 16% growth compared to 2023's blockbuster result.
Why Formula 1 stock is a buy now
This sport will likely smash its attendance and financial records long into the future. As I mentioned earlier, additional automotive brands will join F1's existing teams in 2026, which will attract new fans. But the grid could expand in 2028 to include another team (two more cars), which will increase the sport's revenue almost across the board. Nothing is confirmed, but American team Andretti Autosport is the likely entrant should a bid be accepted.
Plus, there could be a shakeup in F1's TV and streaming deals in the near future, which contributed $1 billion to the sport's revenue last year. Sky Sports will hold the rights in primary markets like the United Kingdom until 2029 and parts of Europe until 2027. ESPN will continue to broadcast most races in the U.S. until 2025.
However, rumors were swirling late last year that Apple could bid up to $2 billion per year for the global broadcast rights to F1, which would instantly double the sport's media revenue. There has been no further news, but it proves just how quickly F1's value is appreciating.
There are three classes of Liberty Formula One stock. Investors can buy the Class A shares (NASDAQ: FWONA) if they want voting rights, or the Class C shares (NASDAQ: FWONK), which don't offer voting rights. Both will track the performance of the sport in exactly the same way.
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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. The Motley Fool has a disclosure policy.
