Genius Sports Stock’s 125% Rise Could Be Just the Start for This Battered Tech Play

Genius Sports Ltd Uses Technology to Improve Sports Betting

Remember when the COVID-19 pandemic surfaced? Nearly everything requiring human interaction was essentially shut down. Offices, factories, schools, and the travel industry were locked down.

And many sporting events were either shuttered or scaled down. That resulted in a significant drop in sports betting, but now with the reopening of the economy, everything is coming back, including the NCAA March Madness tournament.

The global sports betting market could expand at a compound annual growth rate (CAGR) of 10.1% from about $67.0 billion in 2020 to a staggering $145.0 billion by 2028. (Source: “Sports Betting Market Size, Share & Trends Analysis Report,” Grand View Research, Inc., last accessed March 21, 2022.)

Given that many people love to bet, it’s time for investors to look at beaten-down stocks that are related to sports betting. For instance, Genius Sports Ltd (NYSE:GENI) is a compelling play on the digitalization of sports data.

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The technology behind Genius Sports allows the incredible amount of data generated by sports leagues and venues to be congregated and used by gamblers.

The company has a vast network of clients in more than 150 countries, and it’s involved in more than 240,000 sporting events, including those of the NFL and NBA. (Source: “Investor Relations,” Genius Sports Ltd, last accessed March 21, 2022.)

Massive Opportunity With GENI Stock?

The Genius Sports stock chart is dismal (see below). Shares of Genius Sports Ltd are down by a whopping 31% this year and 79% from their high of $25.18 in May 2021, made shortly after the stock’s debut in April 2021.

It’s now clear that the initial surge by GENI stock was excessive, but my view is that the subsequent selling was also excessive. Genius Sports stock fell to $4.16 on March 14 and then rallied by about 25%.

The selling of Genius Sports Ltd shares was accompanied by weak relative strength and a negative moving average convergence/divergence (MACD). Until we see an improvement in its relative strength, GENI stock will find it hard to hold after making gains.

At this point, Genius Sports stock is entrenched in a death cross, a bearish technical crossover pattern that appears when the 50-day moving average breaks below the 200-day moving average. This means sellers are increasing in the short term.

Chart courtesy of StockCharts.com

Shares of Genius Sports Ltd will need to attract more buying in order to extend its recent rally to the 50-day moving average at $5.84.

The Fibonacci retracement lines on the above chart show massive upside for contrarian traders who are willing to assume some risk.

Watch for GENI stock to target the 61.8% retracement at $12.24, representing a potential move of 125%. Above this is the 200-day moving average at $13.53 and the next retracement level at $14.74, for a potential rally of 183%.

Analyst Take

Genius Sports stock could trade lower, but if we accept $4.00 as the worst-case scenario, the upside potential looks intriguing and provides a strong risk/reward trade-off.

I like the niche opportunity presented by Genius Sports Ltd in the big-data sports technology market. My view is that the expected pickup in sports betting will power a rally by GENI stock.