Endeavor Group Holdings, Inc. (EDR) continues to thrive as it experiences heightened event demand, financial stability, strategic partnerships, and upcoming dividends. With its remarkable profitability and positive analyst outlook, EDR stands out as the foremost choice for investors looking to capitalize on the entertainment industry.
Let us discuss this in detail.
EDR is a leading global sports and entertainment company, boasting a portfolio of the world's most captivating storytellers, brands, live events, and experiences. It operates across three segments: Owned Sports Properties; Events, Experiences & Rights; and Representation.
The company kicked off 2023 with a strong performance, achieving impressive results in the first quarter. The Owned Sports Properties segment generated $353.30 million in revenue, up 19.1% year-over-year due to increased media rights fees, sponsorships, commercial pay-per-view, and event-related revenue at UFC.
The Events, Experiences & Rights segment’s revenue also rose to $800.80 million, up 2.5% year-over-year, driven by record attendance and sponsorship sales at the Miami Open, growth at IMG Academy, and the inclusion of Barrett-Jackson, which was acquired in August 2022.
Moreover, the company has maintained its financial strength throughout the first quarter. EDR’s total assets stood at $12.62 billion on March 31, 2023, reflecting a slight increase from the $12.50 billion as of December 31, 2022.
Furthermore, the company witnessed an increased demand for its events, evidenced by record attendance and remarkable sponsorship sales at the Miami Open. This should result in increased revenue and profitability, further solidifying EDR’s position in the market and attracting more sponsors and attendees to future events.
This positive momentum is expected to contribute to the company's growth and success in the entertainment industry. Shares of EDR have gained 8.9% over the past six months and 24.1% over the past year to close its last trading session at $24.20.
Here is what could shape EDR’s performance in the near term:
Positive Recent Developments
On March 4, EDR and World Wrestling Entertainment, Inc. (WWE) inked a definitive agreement to establish a new publicly listed company, uniting the renowned sports and entertainment brands UFC and WWE. After completion, EDR will hold a 51% controlling interest, while existing WWE shareholders will retain 49%.
UFC and WWE anticipate achieving $50 million to $100 million in annualized run rate cost synergies. EDR also foresees notable growth in revenue streams such as domestic and international media rights, ticket sales, event operations, sponsorship, licensing, and premium hospitality.
Moreover, in its most recent quarterly report, the company disclosed plans to initiate an event-driven share repurchase program for up to $300 million in Class A common stock. Additionally, the company announced plans to commence quarterly dividend payments of up to $25 million.
Favorable Analyst Estimates
Analysts expect EDR’s revenue to increase 9.8% year-over-year to $5.78 billion for the fiscal year ending December 2023. The company’s EPS for the ongoing year is expected to rise 33.6% from the previous year to $1.41.
Furthermore, EDR’s revenue and EPS for the next fiscal year ending December 2024 are expected to grow 13.4% and 22.8% year-over-year to $6.56 billion and $1.73, respectively.
Solid Growth Record
Over the past three years, EDR’s revenue has grown at a CAGR of 4.3%, indicating a steady increase in its financial returns. Similarly, the company's EBITDA has shown a modest CAGR of 1.2%, while its EBIT has experienced a remarkable growth rate of 25.5% during the same period.
High Profitability
EDR’s trailing-12-month gross profit margin of 61.13% is 22.9% higher than the 49.76% industry average. Its trailing-12-month levered FCF margin of 11.09% is 50.6% higher than the 7.36% industry average. Also, EDR’s trailing-12-month cash from operations of $657.75 million compares to the $202.50 million industry average.
POWR Ratings Show Promise
EDR’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. EDR has a B grade for Momentum, consistent with the stock trading above its 50-day and 200-day moving averages of $23.94 and $22.46, respectively. The stock also has a B grade for Growth, in sync with its growth record.
EDR has topped the 13-stock Entertainment - Sports & Theme Parks industry. Click here to access EDR’s Stability, Value, Quality, and Sentiment ratings.
View all the top stocks in the Entertainment - Sports & Theme Parks industry here.
Bottom Line
EDR experienced a surge in event demand, highlighted by the Miami Open's record-breaking attendance and sponsorship sales. Collaborative efforts also suggest notable revenue growth potential. Moreover, backed by stable finances, impressive profitability, and favorable analyst projections, EDR could be a solid premier entertainment stock to own.
How Does Endeavor Group Holdings, Inc. (EDR) Stack Up Against Its Peers?
While EDR has an overall POWR Rating of B, equating to Buy, one could also check out other stocks within the Entertainment - Sports & Theme Parks industry that are decent buys: SeaWorld Entertainment, Inc. (SEAS), Cedar Fair, L.P. (FUN), Six Flags Entertainment Corporation New (SIX).
Discover 10 widely held stocks that our proprietary model shows have tremendous downside potential. Please make sure none of these “death trap” stocks are lurking in your portfolio:
EDR shares were trading at $23.81 per share on Tuesday afternoon, down $0.39 (-1.61%). Year-to-date, EDR has gained 5.63%, versus a 8.12% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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