2025 Concert Surge And SkyBox Drive Adoption Will Improve Marketplace Efficiency

Key Takeaways

• Anticipated concert growth and strategic partnerships should boost brand awareness, customer acquisition, and revenue.
  
• International market expansion and seller-focused technology enhance marketplace efficiency, loyalty, and open new revenue streams.
  
• Dependence on concert supply and increased competition could pressure revenue, profitability, and free cash flow amid declining average order sizes and market uncertainties.

Catalysts

Operates an online ticket marketplace in the United States, Canada, and Japan.

• The anticipated return of concert growth in 2025, with events and stadium tours expected to increase, should drive higher revenues and marketplace growth compared to the digestion year of 2024.
  
• Strategic partnerships, like the one with Brandon Marshall's IM Athlete, aim to boost brand awareness and customer acquisition, potentially increasing future revenues and customer base.
  
• Expansion into international markets by the end of the year could open new revenue streams and increase total addressable market (TAM) for Vivid Seats.
  
• The full launch of SkyBox Drive and continued adoption by sellers is expected to enhance the stickiness and efficiency of the marketplace, potentially improving net margins and seller loyalty.
  
• Cross-selling initiatives with Vegas.com customers are beginning to show promising results, potentially contributing to future profitable growth in gross order value (GOV).

Vivid Seats Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Vivid Seats's revenue will grow by 5.3% annually over the next 3 years.
• Analysts assume that profit margins will increase from 4.6% today to 6.8% in 3 years time.
• Analysts expect earnings to reach $61.8 million (and earnings per share of $0.21) by about December 2027, up from $35.3 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $35.9 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 34.6x on those 2027 earnings, up from 13.3x today. This future PE is greater than the current PE for the US Entertainment industry at 18.0x.
• Analysts expect the number of shares outstanding to grow by 12.31% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.78%, as per the Simply Wall St company report.

Vivid Seats Future Earnings Per Share Growth

Risks

• Reduced concert activity in 2024, with fewer stadium tours and smaller venue events, has led to a decrease in marketplace gross order value (GOV) and could continue to impact revenue growth if trends do not improve.
  
• Increased marketing competition from other players in the industry could pressure profitability, leading Vivid Seats to either increase costs to maintain volume or risk losing market share, thus affecting net margins.
  
• A notable decline in average order size (AOS) by 11% year-over-year due to the market dynamics could impact revenue if the trend continues and volumes do not compensate for the lower pricing.
  
• The heavy dependence on concert supply, exemplified by multiple concert cancellations in the third quarter, presents a risk to achieving projected revenue and adjusted EBITDA targets.
  
• Current pressure on marketplace gross order value and concert lineup uncertainties could limit free cash flow conversion and impact earnings, especially if market dynamics remain unfavorable amid promotional intensity.

Valuation

• The analysts have a consensus price target of $5.65 for Vivid Seats based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $8.0, and the most bearish reporting a price target of just $4.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2027, revenues will be $904.0 million, earnings will come to $61.8 million, and it would be trading on a PE ratio of 34.6x, assuming you use a discount rate of 8.8%.
• Given the current share price of $3.58, the analyst's price target of $5.65 is 36.7% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.