Formerly a well-known talent agency, Endeavor Group Holdings expanded to become one of the most powerful forces in entertainment and professional sports. In conjunction with the WME talent agency, Endeavor also owns the mixed-martial arts circuit Ultimate Fighting Championship or UFC for short. With society gradually returning to normal and with investor appetite strong for initial public offerings, Endeavor’s IPO benefited from excellent timing and offers investors good value.
When Did Endeavor IPO?
Endeavor IPO’d on April 28, 2021, trading at $24 per share and raising over $511 million. The firm was valued at over $10 billion at the time of the IPO.
Endeavor Group Holdings Financial History
Although the Endeavor Group Holdings IPO undoubtedly generated substantial attention for its UFC brand, the glitz alone won’t prevent analysts from carefully scrutinizing the stock.
First, the COVID-19 pandemic took a bite out of the business. In 2019, Endeavor generated revenue of $4.57 billion, up 26.5% from the $3.6 billion the company rang up in 2018. But in the coronavirus-impacted 2020, Endeavor only managed to generate $3.48 billion in top-line sales, down 24% from the year prior and only up less than 4% from 2018.
Second, the net loss attributed to Endeavor in 2019 was $553.8 million. Unfortunately, this figure expanded to almost $655 million last year. Invariably, this will draw viability concerns, especially because of the IPO’s roughly $10 billion valuation.
Additionally, the entertainment giant carries a lot of debt. In 2019, debt measured slightly over $5 billion. Last year, it increased over 17% to $5.92 billion. Glaringly, Endeavor’s liabilities-to-asset ratio was a hair under 0.8 in 2019. In 2020, this ratio increased to 0.88.
This is likely one of the biggest distractions for the Endeavor IPO. A ratio greater than 0.5 indicates that the company finances most of its assets through debt as opposed to equity. Moreover, a high debt ratio suggests Endeavor is overleveraged, which makes borrowing money very difficult.
Endeavor Group Holdings Potential
Among the latest batch of public debuts, the Endeavor Group Holdings is one of the most difficult to decipher. On one hand, the entity owns several compelling brands. In addition to UFC, Endeavor owns EuroLeague, a series focused on European basketball and IMG, an agency that represents world famous athletes and fashion icons. For good measure, it also owns the Miss Universe pageant.
Moreover, as society normalizes from the pandemic, pent-up consumer demand could drive interest for live sporting events and entertainment. After COVID-19’s destructive impact of this arena, a return to normal is exactly what Endeavor needs.
At the same time, this circumstance is a double-edged sword. Other professional sports leagues and entertainment venues will compete ferociously for consumer dollars. And because the labor force still has some ways to go before holistically recovering to pre-pandemic levels, competitors in the entertainment market may face a hard cap of available discretionary income.
This brings the discussion back to the $10 billion valuation. Yes, Endeavor Group has upside potential but only at the right price. Plus, it’s important to realize that bond yields are rising, which disincentivizes risk-on trades as investors can enjoy passive income for very little threat to their portfolio.
How to Buy Endeavor Group (EDR) Stock
The process is easy. If you know how to buy stocks, you can quickly jump on board with EDR. If you don’t, follow the steps below.
- Pick a brokerage.
Obviously, you can’t do anything in the stock market without choosing a brokerage. Thanks to rising competition and technology, investors enjoy mostly standardized incentives such as commission-free trading. Therefore, your decision boils down to personal preference.
If you’re constantly on the go, you may find a mobile trading app is more than adequate. But if you want to develop your investing acumen, you should elect a full-service platform.
- Decide how many shares you want.
Your share count determines your profitability potential and risk exposure. Logically, the more shares you buy, the more profitable you will be as shares rise. Of course, the opposite is true. For a new stock like Endeavor, you may want to limit your overall exposure.
Whatever you decide, make sure to think this process through in a distraction-free environment. Always invest rationally, never emotionally.
- Choose your order type.
Use the below order types to account for the market’s constant price fluctuations.
• Bid: The bid is the highest price a buyer will extend for a stock. It is always lower than the ask.
• Ask: In contrast, the ask is the lowest price that a seller will accept. It is always higher than the bid.
• Spread: On paper, the spread is the difference between the bid and ask. It also signals information about liquidity and risk. Narrower spreads indicate higher liquidity levels and lower risk as you can always find a buyer for your shares. Wider spreads indicate lower liquidity and higher risk because a buyer may not be available.
• Limit order: Use a limit order to buy stock at a specific price. However, there’s no guarantee that the stock will reach said price, leaving your order unfulfilled.
• Market order: To buy shares at the next available price, use a market order. The terms are least favorable to you -- buy orders on the ask, sell orders on the bid.
• Stop-loss order: A stop-loss protects you from downside risk, automatically exiting your position at either a predetermined price or the next available price. Sometimes, the latter price can be extremely low, such as during a gap-down session, where the new opening price is much lower than the prior day’s closing price.
• Stop-limit order: Stop-limit orders exit you only at a predetermined price, eliminating any surprises associated with gap-down sessions. But be aware that following such sessions, there’s no guarantee that a stock will rise to the stop-limit price.
- Execute your trade.
To execute a market order, take these steps:
1. Select action type (buy or sell).
2. Enter the shares you want to acquire (or sell).
3. Hit the buy (or sell) button.
Limit orders are identical, with the exception that you must enter your desired execution price.
Best Online Brokers
Below is a list of best brokers for your consideration.
- Best For:Active and Global TradersSecurely through Interactive Brokers’ website
- Best For:Traders of All Levelssecurely through Moomoo's website
- Best For:Mobile Userssecurely through Plus500's website
- Best For:Momentum traderssecurely through Centerpoint Securities's website
- Best For:Intermediate Traders and Investorssecurely through Webull's app
A Benchmark for Sports Entertainment Stocks
Without the distraction and question marks surrounding the post-pandemic world, it’s possible that Endeavor Group Holdings could justify its lofty valuation. Thanks to its myriad powerful and compelling sports and entertainment brands, the company can drive in the big bucks.
On the flipside, Endeavor stock features heavy leverage. That won’t necessarily appeal to astute investors, where broader market dynamics incentivize a pivot to nearly risk-free passive income due to rising bond yields. Plus, Endeavor faces serious competition from rivals in the space.
Universally, Endeavor may end up being the benchmark for sports entertainment stocks. If it succeeds, investors may find encouragement in risk-on names. If not, watch out.
About Joshua Enomoto
His distinct writing style of distilling convoluted data into relatable and compelling narratives has earned him recognition among several investment-related publications.