Dover Motorsports, Inc. is the “perfect” coronavirus stock because the company hosts NASCAR races where 100,000 fans can gather to infect each other while watching their favorite drivers compete for trophies. Consequently NASCAR, a private organization, postponed all the races.
Before the coronavirus, Dover Motorsports was trading for $2 per share and had a market capitalization of $72 million. After the coronavirus hit, the stock price dropped to $1 per share and a market capitalization of $38 million, and the dividend yield grew to 9 percent.
In the long term, NASCAR is not going anywhere. Once the coronavirus has been dealt with, everything NASCAR will return to normal. Dover Motorsports will resume paying a dividend (assuming that the dividend will get cut or reduced), and the stock price should recover to $2 per share, offering current investors an upside of 100 percent. In the medium term, NASCAR might likely hold races without fans.
During the year, Dover Motorsports hosts six NASCAR events, but the only ones that matter from a revenue standpoint are the Monster Energy NASCAR Cup Series events (formerly the Sprint Cup), which take place in May and October. Having the right to hold a NASCAR Cup Series event is like having a money-printing press. You can’t just build a racetrack and invite NASCAR drivers to race there. All races have to be sanctioned by NASCAR. Track owners like Dover Motorsports have three primary revenue sources: race fans, sponsors, and television networks.
The other two companies involved in NASCAR races are International Speedway Corporation and Speedway Motorsports. Unfortunately, both of these companies were taken private. So, Dover Motorsports is the only publicly traded entity left in the NASCAR realm.
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Disclosure: I don’t own Dover Motorsports stock at this point, but I am watching it.
