On Thursday, Citi reaffirmed its Buy rating on TKO Group Holdings (NYSE:TKO) with a price target of $137.00. The firm's stance comes after TKO Group Holdings announced the acquisition of PBR, OnLocation, and IMG from Endeavor in an all-equity deal valued at $3.25 billion. The transaction is based on an EV-EBITDA multiple of 12.3x.
TKO Group Holdings' recent move to acquire three companies from Endeavor represents a significant expansion of its business portfolio, which has traditionally been focused on sports. The acquisition includes PBR (Professional Bull Riders), OnLocation, a premium experiential hospitality business, and IMG, a global leader in sports, events, media, and fashion.
The analyst from Citi noted the potential concerns that may arise from the deal, acknowledging that the market might react unfavorably due to the complexity it adds to TKO's business narrative. Previously perceived as a pure play sports company, TKO's story may now become more intricate with the integration of these new assets.
Despite these concerns, Citi predicts that any negative impact on TKO's share price will be limited, suggesting that the downside risk could be confined to a low-single digit percentage range. The firm's analysis suggests that while the acquisition could introduce some uncertainty, the overall financial health and market position of TKO Group Holdings remain strong.
As the market processes the news of this acquisition, investors and stakeholders of TKO Group Holdings will be monitoring the company's performance closely to see how it integrates the new entities into its operations and whether the expanded portfolio will enhance TKO's growth and market presence.
In other recent news, TKO Group Holdings has experienced significant developments. The company's Q3 results are eagerly anticipated, with Goldman Sachs expressing confidence in the company's sustained progress and potential for financial growth. Goldman Sachs has raised its price target for TKO Group to $138, while Guggenheim has increased its price target to $140. TKO Group's recent UFC 306 event generated an estimated $35-$40 million in revenue, contributing to its robust financial performance.
Pivotal Research and Citi have initiated coverage on TKO Group with a Buy rating, noting the strong revenue growth potential, especially following the recent merger between UFC and WWE. BofA Securities has reinstated a Buy rating and set a new price target of $140, highlighting TKO's strength in sports rights.
TKO Group has also settled an antitrust lawsuit for $375 million, a significant development in the company's ongoing legal proceedings. Despite this, the company's strong second-quarter performance and improved forecast for the full year have resulted in multiple analyst upgrades. These are the recent developments in TKO Group's journey.
InvestingPro Insights
TKO Group Holdings' recent acquisition aligns with several positive trends highlighted by InvestingPro data and tips. The company's market cap stands at $19.7 billion, reflecting its significant presence in the industry. An InvestingPro Tip indicates that net income is expected to grow this year, which could be further bolstered by the strategic acquisitions announced.
The company's revenue growth is particularly impressive, with a 107.77% increase over the last twelve months and a striking 178.9% growth in the most recent quarter. This robust growth trajectory supports another InvestingPro Tip suggesting that analysts anticipate sales growth in the current year.
While TKO currently operates with a negative P/E ratio of -37.49, indicating it's not profitable over the last twelve months, InvestingPro Tips suggest that analysts predict the company will be profitable this year. This outlook aligns with Citi's optimistic stance and Buy rating.
It's worth noting that TKO has shown strong market performance, with a 56.52% price total return over the past year and a 31.4% return over the last six months. These figures support the InvestingPro Tip highlighting TKO's high return over the last year.
For investors seeking more comprehensive analysis, InvestingPro offers 13 additional tips for TKO, providing deeper insights into the company's financial health and market position.
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