AI cannot overthrow F1! Amid AI anxiety and Middle Eastern conflict impacting the market, Liberty Formula One(FWONK.US) demonstrates the "HALO premium"

Zhitong Finance APP learned that, amid the fierce disruption to market risk appetite caused by the current highly volatile macroeconomic outlook and a geopolitical environment marked by major and sustained uncertainty, the pessimistic narrative of “artificial intelligence overturns everything” is still going on, severely battering software stocks and even any publicly listed company that could potentially be disrupted by AI on its own. However, at this very moment, Wall Street banking giant Bank of America has delivered a line—truly illuminating—to the long-term investors of F1 event owner Liberty Formula One (FWONK.US): “In times of wild swings, boredom is the most exciting (Boring is exciting).”

On Wednesday, Bank of America’s stock analysts upgraded Liberty Formula One’s rating from “Neutral” to “Buy,” keeping the $105 target price unchanged—implying potential upside of nearly 30% over the next 12 months. They emphasized the strength and resilience of its diversified business and the predictability of its revenue growth trajectory.

Analysts at Bank of America also pointed out that this F1 motorsport series owner has virtually no chance of being replaced by artificial intelligence. This halo aligns with the currently extremely hot HALO investment theme in the market, and it also highlights how the HALO theme stands in contrast to the pessimistic narrative of “AI overturns everything,” amid ongoing ranking among the most globally favored themes due to the disturbance from a new round of Middle East geopolitical conflict.

The core assets of Liberty Formula One include Formula 1, MotoGP, and some minority equity investments. Therefore, the company is essentially one of the listed vehicles for commercial rights in F1 events, and the market typically also views it as the F1 owner/controlling party.

Liberty Formula One has two stock trading tickers in the U.S. market, meaning the same underlying asset corresponds to different classes of common stock. These are different equity classes for the same F1 asset platform, with the main differences being voting rights, float, and liquidity—not the underlying business itself: ticker FWONA is Series A, with 1 vote per share; ticker FWONK is Series C, with virtually no voting rights, but both correspond to the same set of underlying economic interests; there is also FWONB (Series B) trading on the OTC market, with 10 votes per share.

“Boring” Liberty Formula One wins Wall Street favor amid Middle East geopolitical storm battering the stock market

“Under conditions of highly volatile macroeconomics and a turbulent geopolitical environment—so boring is the most exciting, and therefore we believe that business models like Liberty Formula One, which are highly durable in operations and have strong performance visibility, should command an even stronger market premium,” the Bank of America analysts led by senior analyst Brent Navon wrote in a report. “In addition, amid prevailing concerns across the media and entertainment ecosystem about AI disintermediation disrupting them, we believe that live sports events—especially FWONK—are more insulated from these risks.”

The analyst team led by Navon maintains its $105 target price, which implies nearly a 30% increase from last Friday’s closing price. Among all Wall Street analysts covering the stock, the company currently has 14 bullish ratings equivalent to a “Buy” level, 3 neutral ratings equivalent to “Hold,” and 0 bearish ratings equivalent to “Sell.”

As shown in the figure above, the company’s stock price has also recently deviated from the trend line. To some extent, Liberty Formula One’s stock price has been affected by the Iran war as well; however, compared with the broader U.S. stock market and the Nasdaq 100 index tracking the most popular global tech stocks, the pullback looks very small.

Before the Iran war broke out, the company’s share price was $91.59. But after the U.S.-led joint action with Israel began carrying out a series of airstrikes, its share price fell alongside global equities against the backdrop of a cooling risk appetite in the market. In addition, on the fundamentals side, the company was also impacted by the escalation of the Middle East geopolitical situation. The war prompted F1 to remove the two races in Bahrain and Saudi Arabia from the April schedule, causing a mild gap in both revenue and race scheduling in the near term.

However, the bearish sentiment surrounding the stock in recent days has eased significantly. And as the Bank of America team led by Navon raised its rating this time, Liberty Formula One’s stock price is expected to record two consecutive weeks of rising against the trend. By contrast, the Nasdaq 100 index has already shown five straight weeks of weekly declines on the candlestick chart. Bank of America analysts added that the recent Middle East war is only a one-off sentiment disturbance and will not have a significant impact on the company’s long-term value as a whole.

“Trophy-class assets” + a “HALO” super halo overhead

The Bank of America analyst team led by Navon said that the predictable business model of the Formula One event series could also bring even more exciting outcomes: being acquired by some giant. He said that F1 is a “trophy-class asset,” and if it is put up for sale, it would inevitably trigger interest from many affluent buyers.

There have also been notable acquisition interests in the past. Media have reported that Saudi Arabia’s sovereign wealth fund—Saudi Public Investment Fund (PIF)—had, in 2023, linked the company to a potential acquisition and considered an offer far higher than $20 billion. Analysts such as Navon said that if the company really chooses to sell in the future, PIF has “extremely strong financial capacity” to acquire it.

Bank of America analysts also said that TKO Group Holdings Inc., which owns the Ultimate Fighting Championship (UFC) and World Wrestling Entertainment (WWE), could be another potential affluent buyer. Bank of America expects that, if Liberty Formula One were put on the block, TKO Group would at least show some degree of interest in bidding. The core reason is that the company holds a strong integrator position in sports and entertainment and previously showed strong interest in MotoGP owner Dorna Sports SL. “If/when FWONK becomes actionable, we believe this asset will attract strong interest from strategic asset buyers and large financial buyers,” the Bank of America analyst team said.

In addition, Liberty Formula One, with its “HALO” halo overhead, also has a strong premium of “resisting AI disruption.” Because the narrative logic of “AI overturns everything” has dealt a blow to the revenue-generating trajectory of niches that favor digital assets and light-asset models, the “old economy” areas that emphasize asset-heavy entities and stable cash flows are becoming increasingly favored by retail investors and highly leveraged hedge funds—especially mega conglomerates like Liberty Formula One, which holds one of the most globally popular, irreplaceable event assets.

Recently, Wall Street analysts have published research notes stating that the share prices of heavy-asset companies with tangible production assets are significantly outperforming the global stock market. This is also the core logic behind why European stocks have notably outperformed U.S. stocks. As global investors—including hedge funds and retail investors—actively look for safe harbors to avoid the sell-off storm of “AI overturns everything,” there is a tacit shift of investment focus toward HALO (Heavy Assets, Low Obsolescence, i.e., focusing on heavy assets and low risk of AI displacement) stock categories, and these stocks carry high weights in Europe, while U.S. weights tilt toward “lightweight capital” stocks.

Another Wall Street financial giant, Goldman Sachs, in its recent research note described the “HALO effect” as not the “halo effect” commonly mentioned in psychology. Instead, it refers to companies whose value mainly comes from entities/assets/core capacity/manufacturing networks/infrastructure with very high replicable costs and long lifespans, and therefore are considered less likely to be quickly replaced by AI or “technically outdated,” making them more likely to receive a “safe-haven premium” when AI anxiety heats up. Goldman Sachs defines HALO theme stocks as assets that are difficult to be hit by AI’s technical obsolescence. In recent times, Bank of America’s sales and trading desk has also guided high-net-worth clients to actively allocate toward these HALO stocks that carry premium characteristics under AI shocks.

Bank of America said that amid widespread concerns in media and entertainment about AI disruption, live sports—especially F1—are actually more defensive. This matches the company’s fundamentals: according to Liberty Media’s official filings, F1’s main revenue comes from event promotion, media rights, and sponsorship. The terms of these contracts are mostly three years, 3 to 5 years, and 3 to 7 years respectively. Overall, its revenue visibility is already higher than many other light-asset business models that rely more on traffic distribution channels or SaaS subscriptions based on seat numbers. Therefore, Bank of America believes that under AI panic and macro volatility, F1 event assets—assets that are hard to replace with algorithms and that have stable cash flows—should rightfully enjoy a premium for quality content/sports assets plus a “HALO valuation premium.”