This company has a mission to “bring the world together through live experiences” but with its business hit by the pandemic, is Eventbrite stock a good buy?
Eventbrite (NYSE: EB) stock has had a turbulent time since going public in September 2018. Eventbrite experienced problems with the integration of Ticketfly and a revenue slowdown in 2019 before being hit by the pandemic. This has undoubtedly weighed on the stock price, but taking a long-term view, is it a good investment?
The bull case for Eventbrite:
Eventbrite targets medium to small-sized events and allows anyone to sell tickets on the platform. These events that Eventbrite targets are deemed too small for ticketing giant Live Nation (NYSE: LYV) which operates Ticketmaster. This undoubtedly leaves a significant market opportunity for Eventbrite, and perhaps you have used or come across its product in your daily life with 4.7 million events in 180 countries in 2019.
Eventbrite is led by co-founder and CEO Julia Hartz. She has an 80% approval rating on Glassdoor, which suggests a strong company culture and is an encouraging sign for investors. Hartz is also giving up her salary for the current year which demonstrates her commitment to the company.
The company acted swiftly, aiming to reduce costs by $100 million by Q4 of 2020, and cropping its headcount by 45% as a cost-cutting measure and enforcing a hire-freeze. Eventbrite also has access to $225 million in long term loans, which should enable it to weather the current crisis and provide more financial stability in a bid to become profitable in the future.
Although the pandemic has hit Eventbrite, CEO Hartz believes that we will see the resumption of small to medium live events earlier than large events. These events are the company’s lifeblood, and Hartz thinks that the “pent-up demand” will cause a surge in small events. In 2019, one-third of paid creators on Eventbrite were responsible for over 60% of ticket fees, and management believes that targeting and retaining these creators will drive growth. The 98% of creators on Eventbrite who have signed up in 2019 did so organically, which demonstrates the strength of the platform.
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The bear case for Eventbrite:
Eventbrite’s revenue growth has decreased from an impressive 45% in 2018 to 12% in 2019, with a 40% decrease in revenue in the latest quarter. The company is still unprofitable, reporting a loss of $68 million in 2019. Although this is not uncommon among technology stocks, this, coupled with slowing revenue growth, may spell trouble for investors. The decrease in revenue growth was also impacted by Ticketfly integration and subsequent data breach, which hurt the bottom-line.
In Q1 of 2020, the net loss has surged to $146.5 million compared to that of $10 million a year earlier with $49 million revenue. The majority of this loss can be attributed to the costs related to COVID-19, such as refunding ticket sales along with ticket sales decreasing by 90% year-over-year in March before increasing slightly. Despite these losses, the balance sheet remains relatively strong, with $373 million in cash on the balance sheet.
So, should I buy Eventbrite stock?:
Eventbrite has been forced to restructure during this time, and the cost-cutting measures should prove to be effective in surviving during this period. There is also an emphasis being placed on customer service and increased efficiency to enable a greater focus on the most valuable customers who provide the majority of revenue.
Due to the nature of the current crisis, there are many uncertainties, such as when live events will return, which will have a considerable impact on Eventbrite. Taking a long term view and management’s quick response to the crisis along with attempts to strengthen the business, an investment in Eventbrite could prove to be fruitful provided one can stomach volatility in the coming months.
Kevin Hartz, an early investor in PayPal (NASDAQ: PYPL) and Renaud Visage, is an Angel investor.
Julia Hertz- CEO.
Kevin Hartz- Chairman of Board of Directors.
Renaud Visage- Manages the technical roadmap
There were 309 million tickets issued in 2019.
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