What happened
Shares of Genius Sports (GENI -3.04%) were up over 20% as of 10:59 a.m. on Tuesday following the company's first-quarter earnings report. The technology provider for the sports betting and media industries reported revenue that exceeded expectations. Management also guided for a strong rest of the year, especially for the all-important bottom line.
The stock is 84% off its all-time highs set in 2021 but has risen 36% year to date.
So what
Revenue growth hasn't been a problem for Genius Sports, but the company's net loss narrowed by 37% in the first quarter. While it's still underwater, investors were pleased to see growing demand for the company's services lead to improving margins.
The market has lost its appetite for unprofitable growth stocks over the last year, which initially sent the stock down. However, many of these beaten-down growth stocks are now trading at cheap valuations, and Genius Sports is one of them. It is now valued at a price-to-sales ratio of 2.8 after trading as high as 24 times sales in 2021.
Genius Sports reported a 19% year-over-year increase in total revenue on a currency-neutral basis last quarter. The company has doubled its quarterly revenue since 2019.
Now what
Now that Genius Sports is starting to prove it can reach profitability, investors are sensing a more-valuable business coming together, which is driving the stock higher.
On that note, management guided for accelerating profitability for the rest of the year, as measured by adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization). Full-year 2023 revenue is now expected to be $400 million, up from $391 million in the prior outlook, with adjusted EBITDA expected to be $49 million.
The company is a leader in supplying betting and media services for major sports leagues, including working with the NBA and NFL on new platforms to keep fans engaged. The future is looking brighter, which could support further gains for the stock.
