Zacks Initiates Coverage of MSGM With Outperform Recommendation

Zacks Investment Research has recently initiated coverage of Motorsport Games Inc. MSGM with an “Outperform” recommendation, reflecting our view that the company has entered a structurally improved phase following a multi-year turnaround.

Motorsport Games is a racing video game developer and publisher focused on officially licensed motorsport franchises. After several challenging years marked by heavy investment and restructuring, the company is now demonstrating sustained operating profitability, improved margins and a more durable revenue mix. The recent results suggest that this progress is not a one-time rebound, but rather the outcome of lower costs, better execution and higher revenues.

A central pillar of the investment thesis is Le Mans Ultimate, which has emerged as Motorsport Games’ core franchise. Following the sale of the NASCAR license in late 2023, Le Mans Ultimate has more than filled the revenue gap, generating higher sales than NASCAR titles did in the comparable prior period. The game’s exit from Early Access in mid-2025 drove record player engagement, while ongoing downloadable content releases continue to extend monetization beyond launch. This performance supports a longer product lifecycle and more predictable cash generation.

Profitability has been reinforced by meaningful margin expansion. A higher mix of digital content, combined with sharply lower development and administrative costs, has driven strong operating leverage. For a microcap company, this dynamic is particularly powerful, as incremental revenues can translate disproportionately into earnings growth.

The research report highlights several key factors that could drive Motorsport Games’ growth. Another positive development is the launch of the RaceControl platform, which adds a recurring subscription layer to the business. RaceControl delivered its strongest quarter so far in the third quarter of 2025, improving revenue visibility and customer lifetime value while reducing the dependence on single-title sales cycles.

Balance sheet risks have also eased. Improved liquidity and positive operating cash flow allowed management to remove going-concern language in 2025, reaching a milestone in the company’s recovery. Looking ahead, medium-term upside could come from the console expansion of Le Mans Ultimate. Early production has begun, with a targeted launch window of late 2026 to early 2027. If executed successfully, this initiative could materially expand the addressable market while leveraging existing intellectual property.

However, potential investors should consider certain risks outlined in the report. Motorsport Games remains exposed to high revenue concentration, with a small number of customers accounting for a significant share of sales, which can increase earnings volatility. Recent profitability has also been partially supported by non-recurring items, raising the bar for sustained execution, going forward.

In addition, outstanding warrants and the company’s capital structure present potential shareholder dilution risks. Long-term licensing commitments introduce fixed cost obligations that could pressure margins if revenues soften, while the extended timeline for console development carries execution and timing risks.

With shares trading at valuation multiples well below industry and market averages, Motorsport Games offers an attractive risk-reward profile for investors willing to tolerate microcap volatility.

For a comprehensive analysis of Motorsport Games' financial health, strategic initiatives and market positioning, you are encouraged to view the full Zacks research report. This in-depth report provides a detailed discussion of the company's operational strategies, financial performance and the potential risks and opportunities that lie ahead.

Read the full Research Report on Motorsport Games here>>>

Note: Our initiation of coverage on Motorsport Games, which has a modest market capitalization of $19.47 million, aims to equip investors with the information needed to make informed decisions in this promising but inherently risky segment of the market.

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This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research