Why Sportradar Stock Is Sinking This Week

What happened

Shares of Sportradar (SRAD -0.57%) are sliding this week after the release of the company’s fourth-quarter earnings results. The company’s share price is down roughly 8.9% according to data from S&P Global Market Intelligence.

Sportradar published its Q4 report before the market opened on March 15, posting sales that came in ahead of expectations but earnings that fell short of the market’s target. The company recorded sales of roughly 206.3 million euros and non-GAAP (adjusted) earnings before interest, taxes, depreciation, and amortization (EBITDA) of 35.1 million euros. On a U.S. dollar basis, the company posted a loss of $0.11 on revenue of $220.7 million, while the average analyst estimate had called for a profit of $0.03 on sales of $208.09 million. 

So what

Sportradar posted sales growth of 35.4% year over year in the fourth quarter, with strong performance driven in part by last year’s World Cup. Additionally, the company continued to gain ground with its U.S. segment revenue climbing 77% compared to the prior-year period. But despite the strong sales growth, investors are worried about rising costs at the business. 

Sportradar sees rising workforce expenses, and the company is also investing into artificial intelligence technologies that will eat into its bottom-line performance this year. Following the earnings release, multiple analysts cut their one-year price targets for the stock. 

Now what

For the current fiscal year, Sportradar is guiding for sales to come in between $965.1 million and $984.4 million, a target range that came in well ahead of the market’s previous expectations for annual sales of $936.11 million. But the company is ramping up its investments in AI and other potential growth drivers, and investors are expecting these initiatives to lead to weaker-than-anticipated EBITDA over the next couple of years.

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool recommends Sportradar Group Ag. The Motley Fool has a disclosure policy.

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