"It pukes cash," says analyst Robert Simonson of William Blair, about International Speedway, (NASDAQ:ISCA). The company operates 13 racetracks around the U.S. and trades at a modest 13.7 times estimated 2008 earnings. Shares, however, fell 22% this year on fears that a U.S. recession will keep NASCAR's lower-income fan base away from games and merchandise.
Barron's says investors are forgetting that 75% of earnings come from existing TV and media deals and aren't affected by rising gas prices and unemployment. Other moneymakers like advanced ticket sales and corporate sponsorships are holding up. Revenue gains are slight, but will more than cover cost hikes. Merchandising should also improve since last year's fiasco when NASCAR star Dale Earnhardt Jr. switched teams suddenly, rendering $57 million in merchandise worthless. Also, the land purchased for a failed NY expansion will likely be sold off for a $100M gain. Fears of faltering TV ratings and less lucrative corporate sponsorships appear to be unfounded. Coca-Cola (NYSE:KO) and Kroger supermarkets recently signed fat, long term deals with NASCAR. Corporate America still covets NASCARs fans, who are notoriously loyal to drivers and their sponsors. Barron's says NASCAR could realize its projected 10% revenue growth this year, and send current $41.97 shares up to $50.