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Sunday, January 17, 2021

Dover Motorsports, Inc. (NYSE:DVD) Margins Greatly Improving

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Dover Motorsports, Inc. (NYSE: DVD) shares are currently trading in a range of $2.39-$2.44, have seen enhanced trading activity after the company recently made a sale of one of its two major assets. Over a 52-week period, shares of the company have traded as low as $1.93 and as high as $2.54. At a current share price of $2.43, Dover Motorsports has a market capitalization of $87.58 million.

The company is best known as the owner and operator of one of the premier motor sports venues in the United States – the 770-acre Dover International Speedway in Dover, Delaware. That Dover International Speedway is the site of 6 official NASCAR races, including 2 races in the NASCAR Sprint Cup Series professional stock car racing circuit and 2 races in the NASCAR XFINITY Series racing circuit.

Dover Motorsports, Inc. (NYSE: DVD) trading activity has been rather quite of late, but what has always enticed investors, was what the company planned to do with its other major asset – the Nashville Superspeedway outside of Nashville, Tennessee. At 1,400 acres, this racing venue was nearly twice the size of the Dover International Speedway. Moreover, it was conveniently located to the fast-growing Nashville metropolitan area.

Yet, company management never seemed to know what to do with this property, and that always weighed on the company’s stock price. Since early 2014, research analysts have been calling on DVD management to find a buyer for the Nashville Superspeedway. And, indeed, one planned sale of the company actually fell through.

However, in August 2016, DVD found a new buyer for the property: Panattoni Development Company, an international commercial real estate company.

According to the terms of the deal, DVD will receive $27.5 million in cash, which will be used in part to pay down outstanding debt. This cash payment will cover the cost of the racing facility, as well as attached assets. In addition, Panattoni has agreed to assume the municipal tax obligations of the Nashville Superspeedway, which was financed with taxpayer money. On news of the deal, shares of DVD traded up 16 percent.

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All eyes are now on what DVD will do with the cash from the deal other than pay down debt. Investors are already feeling good about the Dover International Speedway, which has NASCAR races scheduled there until 2020 and a NASDAQ television deal good through 2024. But what steps will DVD now take to grow the company in new directions?

Currently, institutional investors own more than half (53 percent) of the company. These investors, led by Ariel Investments who holds just under 3M shares as of July 1st, could provide a needed stimulus and spur DVD management to grow the company either further, such as by acquiring another raceway facilities, expanding into new services for the NASCAR racing industry, or diversifying into other motor sports.

Before the sale of the Nashville Superspeedway, investors viewed the company as a micro-cap value play with a seriously underutilized and undervalued asset. The task for the company will now be to guide investor expectations around a new vision for Dover Motorsports. If DVD is able to convince investors of its long-term growth strategy, the company’s shares may be headed significantly higher than their current 52-week high of $2.54. For continuing coverage on $DVD and our other fast moving picks, sign up for our free newsletter today and get our next hot stock pick!

 

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