Endeavor continues to kill bears

Share price of Endeavor Group Holdings

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Shares of entertainment and sports operator Endeavor Group Holdings Inc. (NYSE: EDR ) have been steady, forming solid ground above $20. The company benefited from a strong rebound in live events, which was also felt by Live Nation Entertainment Inc. (NYSE: LYV ) and WWE Entertainment Inc. (NYSE: WWE ). Endeavor owns and operates a number of sports leagues, including the Ultimate Fighting Championship (UFC), the EuroLeague and Professional Bull Riders (PBR).

The company created Diamond Baseball Holdings (DBH) to acquire nine Major League Baseball (MLB) Professional Development League clubs (PDL). Most of them are single-A to triple-A affiliates. Four of those are affiliates of the 2021 world champion Atlanta Braves.

If its entertainment comes in some form, Endeavor is associated with it. Its musical artists dominate the Grammys, representing top talent from Silk Sonic and Rodrigo to Dua Lipa, Adele and Alanis Morissette. They cornered the entertainment talent market, representing notable A-list actors like Christian Bale, Ben Affleck, Hugh Jackman and Dwayne Johnson.

Endeavor Content subsidiary divested

Endeavor Content is the scripting unit responsible for packaging, financing, producing and/or selling more than 100 films and series, with 40 more planned for 2023. Endeavor Corporation sold 80 percent of its Endeavor Content unit to South Korea’s CJ ENM in 2022 for $775 million. Part of the push for the sale was to appease the Authors Guild of America’s (WGA) policy limiting agencies to owning no more than 20 percent of production entities.

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The WGA considers organizations producing film or television projects and representing talent on the projects a conflict of interest and anti-competitive conduct. The divestiture helped Endeavor post a profitable quarter and reduce most of its debt load. Endeavor will still have its nonscript division.

Losses come back, but guidance is raised

On February 28, 2023, Endeavor released its results for December 2022 for the fourth quarter of fiscal 2022. The company reported an earnings per share (EPS) loss of $0.72, excluding non-recurring items, while analysts’ consensus was for a profit of $0.19, missing estimates ($0.91).

Revenue fell (16.3%) to $1.26 billion from $1.27 billion. The decline in revenue came from the sale of its Endeavor content business. The company paid down $500 million in discretionary debt to improve net leverage. Endeavor ended the year with $767.8 million in cash and cash equivalents and $5.169 billion in total debt.

subdivision subdivision

A close look at the headline numbers paints a complete picture. Revenue at its Own Sports Properties unit fell 9 percent to $301.4 million. Its Events, Experiences and Entitlements segment rose 8% to $557.7 million. Its agency business revenue fell (43%) to $408.5 million. This is from its revenue of $332.8 million in the fourth quarter of 2021 and $737.4 million in 2021. The unit is for sale in January 2022. Adjusted EBITDA rose 5% to $123.9 million.

Highlights for Q4 2022

Since the lifting of COVID restrictions, UFC has held 21 sold-out events in a row, bringing the total to 29. It delivered double-digit revenue growth for its events, experiences and rights division. It has renewed media rights agreements with ten international companies. The company paid down $500 million in discretionary debt to boost net leverage.

Ari Emanuel, CEO of Endeavor, commented: “Despite ongoing macroeconomic headwinds, our business has proven resilient. With 2023 in focus, given our position as a provider of premium content, live events and experiences, we remain Confident in Endeavor’s ability to deliver long-term value.”

Raise full-year 2023 guidance

Endeavor raised its full-year 2023 revenue guidance to $5.825 billion to $5.975 billion, compared with analysts’ consensus estimate of $5.81 billion. The company also raised its UFC pay-per-view (PPV) price to $79.99, up $5.00 in 2023, in a deal with Walt Disney’s (NYSE: DIS ) ESPN+ network. Adjusted EBITDA is expected to rise 10 percent to a range of $1.25 billion to $1.305 billion.

Weekly descending triangle breakout

The weekly candlestick chart on the EDR shows a descending triangle with lower highs and a flat bottom. The triangle started to form after peaking at $26.12 in September 2022. It hit a low of $18.58 before bouncing back. Each bounce off the lower trendline rallied to a lower high until the weekly market structure low (MSL) triggered a break above $22.67 on its Q4 2022 earnings release. Shares are attempting to stay above the MSL trigger point in a double top attempt at $24.40.

The weekly stochastic is up to $24.40 in the 60-segment. The weekly 20-period exponential moving average (EMA) was up to $22.10 and the 50-period EMA was down to $22.30. Pullback support is at $22.67 weekly MSL trigger, $21.34, $20.18 and $19.64.

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