Entertainment and sports content operator Endeavor Group (NYSE:EDR) stock has weathered the recent market sell-off. Endeavor has been the premiere reopening play as it provides key talent that enables streaming and live content in nearly all aspects of sports and entertainment. The Company is expanding its footprint in the sports betting market with its acquisition of OpenBet acquisition. The IMG Arena serves over 470 sportsbook brands through data and video feeds layering into OpenBet to process near 3 billion bets in 2020. The Ultimate Fighting Championships (UFC) has had its best nine-month period in history. Endeavor provides a good chunk of the talent needed to produce blockbuster motion pictures, Grammy awards, and streaming content. With top-line growing at a 60% rate, the Company is operating on all cylinders. Prudent investors seeking a one-stop shop for entertainment content can watch for opportunistic pullbacks in shares of Endeavor.
Q3 2021 Earnings Release
On Nov. 15, 2021, Endeavor released its fiscal third-quarter 2021 results for the quarter ending September 2021. The Company reported an GAAP earnings-per-share (EPS) loss of (-$0.16) excluding non-recurring items versus consensus analyst estimates for a loss of (-$0.13), beating estimates by $0.03. Revenues rose nearly 60.9% year-over-year (YOY) to $1.39 billion beating consensus estimates for $1.32 billion. Endeavor CEO Ari Emanuel commented:
“We continue to capitalize on the elevated demand for premium content and live events coming out of the pandemic. Given our unique positioning within the sports and entertainment industry and our ability to leverage powerful secular content trends, we see no signs of this momentum waning through the end of the year.”
Raised Guidance
The Company raised its full-year 2021 guidance to revenues between $4.89 billion to $4.95 billion versus $4.83 billion consensus analyst estimates.
Conference Call Takeaways
CEO Emanuel set the tone:
“ UFC posted its best nine-month year-to-date period in the 28-year history in terms of revenue and adjusted EBITDA, and this despite lower event output in the third quarter versus third quarter 2020. During the third quarter, UFC sold out all three Pay-Per-View events and UFC 264 became the third highest grossing event in UFC history. Gate revenues at all events was enhanced by our own VIP experience offering from our location that puts fans in the center of the action. Meanwhile, commercial Pay-Per-View saw the highest worldwide grossing revenue quarter since the pandemic began, driven in large part by the many U.S. restaurants and bars starting to open in full capacity. We also saw strong performances across our consumer products and licensing and sponsorship categories. UFC’s sponsorship revenue is up 59% compared to third quarter 2019, the last non-COVID impacted here. We're seeing similar sponsorship increases across the balance of our owned and operated sports and events portfolio. In terms of international media rights, we've closed nine new deals throughout Asia Pacific during the period. If you combine these nine with the prior five international rights deals we discussed last quarter, the aggregate average annual value is of more than 80% over the prior deals.”
He continued:
"Beyond UFC, our businesses continue to benefit from the pent-up demand for entertainment created by the pandemic. While reopening rates continue to vary geographically, we are seeing increased activity across all lines of our business. Linear and digital platforms are in a race for more content, creating an uptick in television and film productions. Meanwhile, our talent representation business, excluding music and theater, is up double digits this quarter versus third quarter 2019. And we have room for more optimism as Broadway recently reopened and music artists commencing multi-year tours in large venues. On the sports side, fans are filling stadiums and sponsors are eager to spend dollars to reach those fans and make up for lost time. If you look at Super Bowl 56, ticket sales from our location, they are pacing meaningfully ahead of 2019 sales for Super Bowl 54. The average ticket price is up over 50% on a like-for-like basis. Now turning to sports betting, a fast-growing complement to sports media rights and live events. The combination of the pandemic's role as a catalyst for online sports betting, the increased betting legalization among U.S. states and the opening of new territories globally has laid the foundation for further growth of our IMG Arena and soon to include OpenBet sports betting business. As it currently stands, IMG Arena is part of our events, experiences and rights segment, upon closing of our OpenBet acquisition, which we announced at the end of the third quarter, and which is expected to close in the first half of '22. IMG Arena and OpenBet will combine to form a fourth operating segment. This will create greater transparency and enable us to better focus on this growing business. IMG Arena is already a major global player in the sports betting market, serving more than 470 sportsbook brands by supplying data and video feeds from rights holders including PGA Tour, UFC, ATP, and MLS. Layering in OpenBet's betting engine, which processed nearly 3 billion bets in 2020, and its modular suite of content offerings with IMG Arena's feeds and virtual products will create a unique end-to-end solution for sports books and rights holders. It’s a fully integrated tech solution combined with a fan-first approach to content, a completely turnkey solution that we can take to existing rights holders within our broader media business are also making us more attractive to prospective clients. We expect this integrated offering will help rights holders drive increased fan engagement and new modernization opportunities in turn increasing the sports betting handle. As I mentioned, while we don't anticipate the acquisition to close until sometime in the first half of 2022, we've already received a high level of interest from sports books and rights holders around the combined entity. And we are extremely encouraged by the growth opportunity ahead.”
EDR Opportunistic Pullback Levels
Using the rifle charts on a weekly and daily time frames provides a precision view of the landscape for EDR stock. The weekly rifle chart indicators have all materialized now. The $35.09 Fibonacci (fib) level has been acting as a double top resistance area as the weekly market structure high (MSH) sell triggered on a breakdown through $32.58. The weekly rifle chart uptrend is stalling with the 5-period moving average (MA) at $33.12 followed by the 15-period MA near the $29.15 fib. The weekly stochastic stalled just below the 90-band as it will either form a mini pup spike or cross back down to retest the 80-band. The weekly market structure low (MSL) buy triggered on the breakout through $28.31, which bulls will defend on pullbacks. The daily rifle chart has been in a downtrend with a falling 5-period MA at $32.58 driven lower by the stochastic mini inverse pup. The daily lower Bollinger Bands (BBs) sit at $28.31. Prudent investors can look for opportunistic pullback levels at the $30.49 daily 50-period MA/fib, $29.68 fib, $28.31 fib, $27.29 fib, $26.26 fib, and the $25.75 fib level. Upside trajectories range from the $36.72 fib level up towards the $41.68 fib level.