Why StubHub Holdings Stock Crashed This Week
Key Points
The World Cup was expected to generate a windfall for StubHub.
Unfortunately, higher revenue growth was met with even higher expenses.
- 10 stocks we like better than StubHub ›
Shares of StubHub (NYSE: STUB) were trading sharply lower this week, falling as much as 17%, according to data supplied by S&P Global Market Intelligence. As of 1:31 p.m. ET on Thursday, the stock was still down 16.8%.
The catalyst that sent the ticketing platform and entertainment specialist plunging was a hangover from its recent financial report and a bearish outlook by Wall Street.
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Post World Cup hangover
Late last week, StubHub announced record second-quarter results, but investors were still disappointed. Revenue rose 33% year over year to $573 million, but the company remained unprofitable, reporting a net loss of $40,000, or breakeven on a per-share basis. The results were fueled by gross merchandise sales (GMS) that climbed 34% to $3.1 billion.
StubHub saw a notable revenue lift from the World Cup during the quarter, but even that wasn't enough to push the company into profitability, as expenses surged 37%, outpacing its revenue growth. The company was beset by customer complaints about slow refunds and fraudulent third-party ticket sales. With the World Cup tailwinds in the rearview mirror, investors are wondering how StubHub will fare going forward.
Management increased its full-year outlook to GMS of $10.2 billion at the midpoint of its guidance, which investors found conservative. This suggests the company expects growth to slow in the back half of the year.
In the wake of the company's disappointing performance, Wall Street reacted accordingly, issuing a number of downgrades and price target adjustments. BofA Securities analyst Justin Post downgraded the stock to underperform (sell) from neutral (hold) and slashed his price target to $7.50, down from $11. The analyst cited the company's tepid outlook as cause for concern.
Indeed, rival Live Nation Entertainment raised its full-year outlook, expecting double-digit growth in attendance, revenue, and adjusted operating income (AOI), suggesting it may be taking market share.
Most investors are adopting a wait-and-see approach to the ticketing platform. As such, StubHub is simply not a hot ticket.
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Bank of America is an advertising partner of Motley Fool Money. Danny Vena, CPA has no position in any of the stocks mentioned. The Motley Fool recommends Live Nation Entertainment. The Motley Fool has a disclosure policy.
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