Competitive Ticketing Pressures And Regulatory Hurdles Will Yield Modest Recovery

Key Takeaways

• Heavy reliance on North America and rising acquisition costs, alongside digital disintermediation, limit Vivid Seats' long-term growth and profitability potential.
  
• Demographic shifts, regulatory pressure, and persistent negative perceptions threaten to suppress ticket demand, customer loyalty, and margin recovery efforts.
  
• Intensifying competition, shifting regulations, changing consumer behavior, and over-reliance on paid marketing threaten Vivid Seats' ability to sustain profitable growth and market share.

Catalysts

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

• Although the company is seeing early positive results from international expansion-now live and contribution margin positive in four European countries-Vivid Seats remains heavily reliant on the mature and intensely competitive North American market, which constrains its long-term revenue and net margin growth potential unless international efforts scale meaningfully.
  
• While consumer preferences continue to favor experiences and live events, driving long-term ticketing demand, demographic changes like an aging population and lower disposable incomes among younger consumers threaten to structurally reduce overall demand for event tickets and limit the pace of top line recovery.
  
• Despite ongoing investment in data analytics and loyalty programs designed to increase customer retention and lifetime value, Vivid Seats faces rising customer acquisition costs due to aggressive competition in paid search channels, making it increasingly expensive to acquire and retain users, thereby exerting pressure on both gross margins and profitability.
  
• Even as advancements in payment technology and smartphone adoption expand the potential user base for online ticketing, accelerating digital disintermediation enables artists, teams, and venues to sell directly to consumers, which is likely to erode the core resale business over time and limit Vivid Seats' volume and take rates, directly impacting revenue and net earnings.
  
• Although the company's strategic cost reduction plan targets $25 million in annualized savings and intends to improve operating efficiency, persistent negative perceptions around service fees and industry-wide regulatory scrutiny-including all-in pricing mandates and broader regulatory threats-risk further impairing customer loyalty and platform usage, hampering efforts to restore revenue growth and expand margins.

Vivid Seats Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on Vivid Seats compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Vivid Seats's revenue will decrease by 4.3% annually over the next 3 years.
• The bearish analysts are not forecasting that Vivid Seats will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Vivid Seats's profit margin will increase from -20.3% to the average US Entertainment industry of 9.4% in 3 years.
• If Vivid Seats's profit margin were to converge on the industry average, you could expect earnings to reach $57.4 million (and earnings per share of $6.38) by about September 2028, up from $-141.2 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 4.0x on those 2028 earnings, up from -0.7x today. This future PE is lower than the current PE for the US Entertainment industry at 39.3x.
• Analysts expect the number of shares outstanding to decline by 1.6% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 12.32%, as per the Simply Wall St company report.

Vivid Seats Future Earnings Per Share Growth

Risks

• The ticketing industry is facing heightened competitive intensity, particularly in performance marketing channels like Google and Bing search auctions, leading to rising customer acquisition costs that are pressuring gross margins and making it difficult for Vivid Seats to profitably grow revenue in the current environment.
  
• Recent regulatory changes, such as the FTC's all-in pricing mandate, have resulted in double-digit declines in industry volumes and lower conversion rates, with uncertainty remaining about whether market recovery will fully materialize, threatening Vivid Seats' topline revenue and earnings stability.
  
• Demographic shifts and consumer softness, including year-over-year declines in visitor numbers and discretionary spending (e.g., Las Vegas data showing mid
• to high single-digit declines), suggest that long-term structural demand for live events may be weaker than previously anticipated, putting at risk the ability to sustain revenue growth over time.
  
• Vivid Seats continues to rely heavily on paid search and performance marketing for customer acquisition, but changes in consumer search behavior and the rise of AI-driven discovery could diminish the effectiveness of these channels, undermining customer growth and pressuring future marketing efficiency and overall revenue growth.
  
• The company's international expansion, while margin accretive, currently represents only a small portion of overall business, and significant exposure to the mature, highly competitive North American market-combined with recent loss of private label partners and market share-could restrain long-term revenue and net earnings improvement.

Valuation

• The assumed bearish price target for Vivid Seats is $18.0, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Vivid Seats's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $40.0, and the most bearish reporting a price target of just $18.0.
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be $607.9 million, earnings will come to $57.4 million, and it would be trading on a PE ratio of 4.0x, assuming you use a discount rate of 12.3%.
• Given the current share price of $14.91, the bearish analyst price target of $18.0 is 17.2% 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.