F1 Teams Trade at 'Material Discount' Compared to NFL, NBA, and Premier League

Formula One teams are currently trading at a "material discount" compared to franchises in the NFL, NBA, and Premier League, according to former Goldman Sachs analyst Elis Wyn Jones. Despite recent record-breaking valuations for teams like Mercedes and McLaren, Jones argues that scarcity and global reach suggest there is still significant room for financial growth in the sport.

Why it matters:

The disparity in valuation highlights a substantial investment opportunity within the motorsport sector. While NFL and NBA teams command revenue multiples in the high teens, F1 teams are currently hovering around six times revenue. As the sport continues to expand its global footprint and profitability, these valuations are expected to climb, potentially reshaping the financial landscape of the grid.

The details:

• Valuation Gap: Forbes estimates the average F1 team is worth $3.6 billion, significantly lower than the NFL average of $7.1 billion and the NBA's $5.4 billion.
• Revenue Multiples: NFL teams trade at roughly 13-14 times revenue, while F1 has risen from one times revenue in 2020 to approximately six times today.
• Recent Highs: Mercedes recently hit a $6 billion valuation following a stake sale, while McLaren was valued at over $4 billion last year.
• Scarcity Factor: With only 11 teams on the grid and potential for just 12, the limited supply of assets drives demand, unlike the 32 teams in the NFL or 30 in the NBA.

The big picture:

Jones emphasizes that F1 offers unique advantages beyond just scarcity. The global nature of the calendar—24 races worldwide—provides unparalleled marketing exposure, effectively offering investors "24 Super Bowls" a year. Additionally, the rise of multi-class motorsport groups, such as TWG Global and McLaren, allows owners to leverage their F1 presence across other series like IndyCar and Formula E, further enhancing the value proposition for sophisticated investors.