Endeavor Stock is a Reopening Kingpin

Entertainment and sports content operator Endeavor Group Holdings NYSE: EDR stock has reversed its downward trajectory during the price discovery period of this recent IPO. The Company released its first earnings report as a publicly-traded company and revealed a powerhouse entertainment content and reopening play. The first reveal shows a vast improvement in fundamentals as content networks, streaming channels, consumers, and partners are desperate for its roster of talent and properties. The Company has literally cornered Hollywood and the first reveal into the numbers illustrates an entertainment and talent turbine that is just getting started. The acceleration of COVID vaccinations has also opened the runway from bringing back live events with extremely pent-up demand. The massive array of parts rely on its synergies to generate a cumulative industry effect. Prudent investors seeking a cornerstone reopening content play can look for opportunistic pullbacks in shares of Endeavor.

Q2 2021 Earnings Release

On Aug. 16, 2021, Endeavor released its fiscal second-quarter 2021 results for the quarter ending June 2021. The Company reported an GAAP earnings-per-share (EPS) loss of (-$1.00) excluding non-recurring items versus consensus analyst estimates for a loss of (-$0.52), missing estimates by (-$0.48). Revenues rose nearly 100% year-over-year (YOY) to $1.1 billion. Q2 2021 marked the return of live events and audiences. The Ultimate Fight Championships (UFC) had the biggest first half in its history including three sold-out arena record and pay-per-view events. The Company repaid $600 million in debt. The Company ended the quarter with nearly $870 million in cash and cash equivalents and total debt of $5.351 billion, down from $5.872 billion at the end of Q1 2021. Endeavor CEO Ari Emanuel commented, “Despite continued challenges brought on by the pandemic, our company once again demonstrated resilience, due in large part to our global portfolio of premium assets and the creativity of our employees and partners,” remarked Ariel Emanuel, CEO, Endeavor. “As you look at the secular trends defining our industries – marked by the growing demand for content, the increased value of the talent and brands behind that content, and the desire of people to come together around live events and experiences – Endeavor remains firmly and uniquely positioned for a strong second half of 2021.”

Raised Guidance

The Company raised its full-year 2021 guidance to revenues between $4.8 billion to $4.85 billion, up from the $4.76 billion to $4.83 billion estimate. The Adjusted EBITDA increases from $765 million to $775 million, up from earlier estimates of $735 million to $745 million. 

Conference Call Takeaways

CEO Emanuel set the tone, “Continuing last quarter's positive trends, we saw increased demand across our portfolio, from premium content to sports betting, and continued to execute across each of our growth factors in our own sports properties, EE&R, and representation segments. Due to the positive momentum and our continued positive outlook for the balance of the year, we have increased our annual guidance” He highlighted the premium sports segment and tie-ins to digital sports betting, “In the second quarter, we renewed our Wimbledon U.S. media rights agreement with ESPN and the tennis channel until 2035 for a significant increase over the prior term. And internationally we guided Football Australia through a landmark domestic media rights deal with Viacom, CBS, and Paramount Plus in Australia, marking the first time the national team and the FFA Cup rights were sold separately from the league. We're also seeing record media rights deals for the UFC in countries like China and France. Our last five renewals have yielded on average over 100% increases. Our strength as a curator and distributor of premium sports media rights, also allows us to capitalize on new enterprises and consumer businesses including sports betting and NFT's. The pandemic further accelerates online betting adoption, which has helped fuel IMG arenas growth beyond video and data streaming into online betting pass for UFC and Golf. Meanwhile, we continue to sign top tier operators like BetMGM while adding marquee properties and events like the Ryder Cup to our offerings. Sports wagering is now legal in 21 states and growing fast. Internationally, the Netherlands and Germany have reregulated or in the process of attracting new frameworks that we believe will pave the way for betting markets to open their as really as the fourth quarter of this year.”

Television and Film Content

CEO Emanuel provided insights I the television and film content segment, “The first half of 2021 saw media and telecom M&A deals reached their highest level in years, $83 billion. Whether its Discovery and Warner Brothers media, or Amazon and MGM, they become super competitors alongside the likes of Netflix and Disney all making big bets on a D-to-C strategy. They have deep pockets and need to differentiate their platforms to drive subscriber growth. The competition for content and count is at the highest level I've seen in 26 years. The number of original series and movies commissioned by streaming platforms grew 48% for the past four quarters as compared to a prior fourth quarters. Netflix alone revealed it will spend 17 billion on content in 2021 up 44% compared to 2020. And remember, we remain platform agnostic and one of the largest representatives of talented independent suppliers of content to the biggest streamers. These trends are visible in our representation segments where our WME bookings for the second half of 2021 are off double digits over where they work at the same point in 2019, the most recent non-COVID impacted here.” He continued, “We are seeing further evidence of premiums being placed on talent in scale and value of individual deals we've been a part of, whether it's a multi-year deal for Peyton Manning for Monday Night Football on ESPN Plus, [indiscernible] with the Food Network, Miley Cyrus with NBCU and Peacock, Michael B. Jordan with Amazon or multi-project deal for Shirley's role with Netflix and Ryan Reynolds with Paramount.”

Acquisitions

CEO Emanuel wrapped it up with details on recent strategic and synergistic acquisitions, “In July, we announced a series of acquisitions that will further expand our capabilities while opening opportunities in new geographies. These were Mailman Group, a leading digital agency for sports brands and right holders. Mailman will integrate with our IMG media and 160 over 90 businesses while bringing new top-tier clients into the fold. Ticket software company 2Q to elevate our suite of offerings on location, our experiential business. The addition of dynamic pricing capabilities enables us to generate more ticketed revenue across our experiential events. And finally, 22, a boutique licensing agency in the Middle East, a region that presents an incredible growth opportunity for IMG licensing, expanding our reach in this growing region opens the door for further expansion down the road.”

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. Since the stock is still a relative recent IPO, the weekly rifle chart needs more time to develop the stochastic and Bollinger Bands (BBs) indicator. However, the weekly 5-period moving average (MA) has been falling at $25.05 along with the 15-period MA at the $27.18 Fibonacci (fib) level. It will take a few months before the weekly stochastic materializes. The daily rifle chart has all indicators running. The downtrend is attempting to reverse as the 5-period MA support slopes up towards the 15-period MA at $24.09 for a crossover and breakout. This is powered by the bullish stochastic mini pup rising at the 50-band. The daily market structure low (MSL) buy triggers above the $26.00 level but an opposing market structure high (MSH) sell triggered under $26.58. Prudent investors can look for opportunistic pullback levels at the $24.48 fib, $24.01 fib, $23.54 fib, $22.87 fib, $22.47 fib, $22.02 fib, and the $20.95 fib. Upside trajectories range from the $28.46 fib upwards to the $35.61 fib level.