Direct Issuance And Global Live Event Demand Will Drive Long-Term Ticket Marketplace Upside

Catalysts

About StubHub Holdings

StubHub Holdings operates a global online marketplace that connects buyers and sellers of live event tickets across sports, music, theater and festivals.

What are the underlying business or industry changes driving this perspective?

• Scaling direct issuance relationships with leagues, teams and promoters such as Major League Baseball and major festivals should unlock primary inventory into StubHub’s marketplace, deepening supply, driving higher GMS velocity and supporting sustained revenue growth.
• Broader adoption of the ReachPro point of sale by power sellers reinforces StubHub as the system of record for inventory and pricing, tightening network effects that can support higher seller dependence, more resilient take rates and structurally stronger net margins.
• Growing demand for live experiences globally, combined with the company’s expanding international footprint in regions like Asia and Latin America, positions StubHub to capture more cross border event tourism and increase earnings leverage as fixed costs are spread over higher GMS.
• Monetization of high intent traffic through sponsored listings and adjacent brand partnerships such as travel integration is likely to add a high margin revenue layer, improving overall unit economics and accelerating EBITDA and free cash flow growth.
• Lapping temporary headwinds from all in pricing and extraordinary comps such as the Taylor Swift Eras Tour should reveal the underlying growth trajectory of the business, enabling faster reported revenue growth and clearer operating margin expansion as marketing spend normalizes.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming StubHub Holdings's revenue will grow by 37.8% annually over the next 3 years.
• Analysts assume that profit margins will increase from -76.6% today to 25.0% in 3 years time.
• Analysts expect earnings to reach $1.2 billion (and earnings per share of $3.53) by about December 2028, up from $-1.4 billion today. However, there is some disagreement amongst the analysts with the more bullish ones expecting earnings as high as $1.8 billion.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 7.7x on those 2028 earnings, up from -3.4x today. This future PE is lower than the current PE for the US Entertainment industry at 20.3x.
• Analysts expect the number of shares outstanding to decline by 6.06% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 10.05%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Regulatory changes such as federally mandated all in pricing have already created an estimated 10% one time headwind to the North American secondary ticketing market, and similar long term consumer protection or anti speculative measures could structurally dampen demand, compress take rates and slow revenue growth.
• StubHub’s strategy of deliberately lowering take rates and increasing performance marketing spend to gain market share may prove less profitable than expected if competitors respond aggressively or customer acquisition efficiency deteriorates. This would pressure net margins and constrain earnings growth.
• The long term growth thesis depends heavily on direct issuance and open distribution with leagues, teams and promoters. If primary ticketing incumbents retain control of distribution or rights holders are slow to adopt multichannel models at scale, the total addressable market expansion could underdeliver, limiting revenue and EBITDA upside.
• The advertising opportunity from sponsored listings and corporate partnerships such as Booking.com is still nascent and being rolled out cautiously to protect user experience. If seller adoption or advertiser demand are weaker than anticipated, the expected high margin revenue layer may not materialize, reducing operating leverage and earnings potential.
• Although fan demand for live events is currently robust and geographically diversifying, the business remains sensitive to macro cycles, event calendars and concentration in blockbuster tours and tournaments. Any prolonged downturn in discretionary spending or weaker major event slate would weigh on GMS, revenue and free cash flow generation.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of $24.18 for StubHub Holdings 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 $45.0, and the most bearish reporting a price target of just $16.0.
  
• In order for you to agree with the analysts, you'd need to believe that by 2028, revenues will be $4.8 billion, earnings will come to $1.2 billion, and it would be trading on a PE ratio of 7.7x, assuming you use a discount rate of 10.1%.
  
• Given the current share price of $13.95, the analyst price target of $24.18 is 42.3% 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.