Alive & Kicking Nascar popularity may rise despite racing tragedy
MOTOR SPORTS FANS WERE shaken when stock-car racer Dale Earnhardt died in a crash four weeks ago. So were motor sports investors. Shares in International Speedway and Speedway Motorsports each dropped about 10% after the tragedy.
Those two leading racing stocks have recovered somewhat from the shock, with Nasdaq-listed ISC recently around $40, and New York-listed Speedway Motorsports at $24. We checked with some racing fans in the brokerage industry, to ask if a loss as notable as Earnhardt would affect the industry's prospects.
Since Barron's began following the sport ("Pole Position," March 17, 1997), the shares of trackowners like ISC and Speedway climbed to a 1999 peak, then slumped amid fears that the popularity of Nascar's stock-car racing had itself peaked.
"Earnhardt introduced a lot of new people to racing," says Salomon Smith Barney analyst David Riedel, "The question is whether those fans will stick with the sport .... I think they will."
A DANGEROUS SPORT WITH LEGIONS OF FANS
The current season's television ratings suggest a resurgent interest in Nascar. Ratings rose almost 20% over last year for the first two races in Nascar's Winston Cup Series, says Joe Hovorka, of Raymond James. Before Earnhardt�s death in the final laps, notes Hovorka, ratings for the Daytona 500 race were the highest since the 1980s.
A new six-year television deal began this year, with NBC, Turner Broadcasting and Fox all sharing the Nascar schedule. The broadcasters have heavily promoted the sport, and done a good job on race-day broadcasts, says Salomon Smith Barney's Riedel.
Mergers have narrowed the field of Nascar stocks to just ISC, Speedway Motorsports and New York-listed Dover Downs Entertainment. Riedel says that much of the industry's revenue opportunity is already determined by the TV deal and the seating capacity of racing venues. The biggest opportunity for pleasant surprises, he says, is from sponsorship deals. That's why his favorite stock is ISC.
That Daytona Beach-based outfit controls nearly half the Winston Cup schedule, he adds. ISC's nationwide collection of tracks offers the best platform for national advertisers. That group expanded this year with new track openings in Chicago and Kansas City. Riedel thinks ISC could earn $1.65 a share for the fiscal year ending November of 2001, potentially pushing ISC Class A shares as high as $70.
Analyst Hovorka, at Raymond James, also favors ISC. He sees some upside, too, for Speedway Motorsports, which he thinks could earn $1.54 this year and $1.73 in 2002-making its shares worth $31, in his view. -Bill Alpert
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