On Friday, Vivid Seats Inc. (NASDAQ:SEAT), an online secondary ticket marketplace, received a positive outlook from an equity research firm, which initiated coverage on the company's stock. The firm assigned a Buy rating to Vivid Seats with a price target of $10.00.
Vivid Seats, boasting a 25% market share in its sector, is recognized for its substantial gross margins of 75% and EBITDA margins exceeding 20%. The company also demonstrates a high free cash flow (FCF) conversion rate, ranging between 60% to 70% of EBITDA. According to the initiating firm, Vivid Seats' competitive advantage is strengthening due to its distinctive loyalty program and strategic investments in platform enhancements such as Vivid Picks, Game Center, and SkyBox Drive.
The company's total addressable market (TAM) is expected to grow, propelled by its recent ventures like the acquisition of Vegas.com and its international expansion, initiated with the purchase of Wavedash in Japan. The $10.00 price target is based on a 12x enterprise value to EBITDA (EV/EBITDA) multiple of the firm's 2025 estimates.
Looking ahead over the medium term, approximately three years, the firm sees a potential for even greater upside for Vivid Seats' shares. With a projected $250 million EBITDA (based on $1 billion in revenue and a 25% margin), and a possible re-rating to a 15x EV/EBITDA multiple, which is more aligned with peers and historical norms for marketplaces, the stock could reach $16. This projection includes the impact of assumed warrant exercises with strikes at $11.50 and $15.
InvestingPro Insights
Vivid Seats Inc. (NASDAQ:SEAT) has been the subject of a bullish analysis from an equity research firm, and the insights from InvestingPro reinforce some of the optimism surrounding the company. According to real-time data from InvestingPro, Vivid Seats is currently trading at a low P/E ratio of 7.88, which suggests that the company may be undervalued relative to its near-term earnings growth potential.
InvestingPro Tips indicate that despite two analysts revising their earnings downwards for the upcoming period, the company's net income is expected to grow this year. This aligns with the equity firm's positive outlook and may bolster investor confidence in the company's financial trajectory.
Additionally, the company operates with a moderate level of debt, which can be a stabilizing factor for investors looking for a company with a manageable debt profile. This is particularly relevant as the company makes strategic investments to expand its market share and improve its platform.
InvestingPro Data highlights that Vivid Seats has demonstrated strong revenue growth over the last twelve months as of Q3 2023, with a 13.42% increase, and a notable quarterly growth rate of 19.97% in Q3 2023. These figures underscore the company's robust performance and potential for continued expansion.
For readers interested in a deeper dive into Vivid Seats' financials and future prospects, InvestingPro offers additional tips and metrics. With the use of coupon code PRONEWS24, users can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, providing access to a comprehensive suite of tools and insights to inform their investment decisions. Currently, there are 6 additional tips listed on InvestingPro for Vivid Seats, offering a more nuanced view of the company's financial health and market position.
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