Live Sports Stocks in Focus as Investors Look for Gems Following Midterms (EDR, BTDG, DKNG, WWE, MSGS, CHDN, XFCI)

The live sports entertainment space is an interesting area to look for diamonds right now. Equities have been hammered in 2022 as the Fed battles inflation and geopolitical narratives dominate the flow of headlines.

With US midterm elections now in the rearview mirror and the market’s preferred outcome — Gridlock — seemingly taking shape, investors may finally start to wade in and search for value in the wreckage.

One area that could be of interest is live sports platforms, which represent a perfect mix of growth and non-cyclicality — the space itself is a growth marketplace and yet people tend to consume just as much live sports entertainment during recessions as they do during booms. It’s recession-proof, but still evidences growth.

This is especially true for combat sports, where we see strong secular growth already underway. With that in mind, we take a look below at a few of the most interesting stocks in the space.

Endeavor Group Holdings Inc. (NYSE:EDR) operates as an intellectual property, content, events, and experiences company. The firm operates through the Owned Sports Properties, Events, Experiences & Rights, and Representation segments.

The Owned Sports Properties segment consists of a unique portfolio of scarce sports properties, including UFC, PBR and Euroleague, that generate significant growth through innovative rights deals and exclusive live events. The Events, Experiences & Rights segment owns and operates many events, including the Miami Open, HSBC Champions, Frieze Art Fair, New York Fashion Week, and Hyde Park Winter Wonderland. The Representation segment provides services to talent and corporate clients and includes the content division, Endeavor Content.

Endeavor Group Holdings Inc. (NYSE:EDR) recently closed its previously announced acquisition of OpenBet, a leading content, platform and service provider to the sports betting industry, from Light & Wonder, Inc. (Nasdaq: LNW) for approximately $800 million paid through a combination of cash ($750 million, subject to certain customary adjustments) and shares of Endeavor’s Class A common stock.

“The addition of OpenBet to our sports betting portfolio will enable us to further capitalize on the massive tailwinds in the fast-evolving sports betting ecosystem and lead the way in defining the future of sports betting entertainment,” said Ariel Emanuel, CEO, Endeavor. “In combination with our IMG ARENA sports data and content business, we’ll look to create and unlock meaningful value for our rights holder and sportsbook customers, helping deliver the most compelling offerings for sports fans globally.”

It will be interesting to see if the stock can break out of its recent sideways action. Over the past week, the stock is net flat, and looking for something new to spark things. EDR shares have been relatively flat over the past month of action, with very little net movement during that period.

Endeavor Group Holdings Inc. (NYSE:EDR) managed to rope in revenues totaling $1.3B in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 18.1%, as compared to year-ago data in comparable terms. In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($2.1B against $2.3B, respectively).

B2Digital, Inc. (OTC US:BTDG) is particularly interesting in this space because it has very well established operations, rapidly growing revenues, and a very cheap price tag on shares. The company runs the acclaimed B2 Fighting Series, which has seen growing popularity and geographic exposure as a top-tier player in the MMA events space.

“The past several months have been busy, and we haven’t communicated as much as we have in the past, but we have been moving forward with our business model, seeing major successes and tremendous live events,” noted Greg P. Bell, Chairman and CEO of B2Digital. “Our growth and productivity have held up well during this stretch, and our brand continues to grow and grab market share in a rapidly growing marketplace.”

B2Digital, Inc. (OTC US:BTDG) most recently an update for shareholders as the Company continues to move forward with its business model after a series of productive and exciting B2 Fighting Series (B2FS) Live events.

Since August, the Company has hosted a series of top-tier MMA live events, including B2FS 170 in Novi, MI, was highlighted by Brandon Lewis getting the win over Taylor Moore and earning a shot on UFC Dana White Contender Series, B2 Grappling 1 in Duluth, MN, debuted on Friday, August 5th in Duluth, Georgia with 13 grappling match ups that included 12 brown and black belt competitors. A huge success with a big crowd and PPV numbers, B2FS 171 in Duluth, MN, saw the Grand Prix finale when Robert Hale won the long tournament and was crowned the new B2FS Pro Welterweight Champion with his decision win over Perry Stargel, B2FS 172 in Dubuque, IA, was the first venture into Dubuque, Iowa’s Grand River Center. The pro card saw Michael Roberts and Cjay Hunter pick up big wins. Along with Kory Moegenburg who has since signed a Bellator Contract, B2FS 173 in Gulf Shores, AL: B2FS ventured to the gulf coast in Orange Beach, Alabama for an exciting night that saw 8 fights end in submission or knock out. It was the debut of Uzbekistan fighter, Bahromjon Mashrapov, on American soil as he knocked out top contender Treston Vines in the main event.

In addition, B2FS 174 in Lake Charles, LA, saw a brutal KO win by pro fighter Aleksey Itunin – the amateur record for “fastest knockout” was broken in the fight. The main event saw Kris Vereen move to 8-0 as a professional. Experts expect him to get the call to the big show anytime. B2FS 175 in Bowling Green, SC, felt like a homecoming ahead of two consecutive weekends in Kentucky. In all, it added up to 14 fights and 2 pro grappling events. UFC Alumni Harry Hunsucker won his grappling match in under 2 minutes. Undefeated pro featherweight prospects Will Baker and Olieng Kalakon headlined the event. Will Baker secured his victory and stayed undefeated. Remember the name Will Baker. You will be seeing him again soon under bright lights. B2FS 176 in Louisville, KY, was a major sell-out event that led to drama as the main event played out to a split decision, with Trent Nott doing just enough to get the nod. It was a contentious night, with three split decisions, leaving fans gasping. B2FS 177 in Dubuque, IA, was one of the biggest night of fights we’ve had to date. 15 MMA fights and 2 pro grappling showcases. A sellout crowd, big PPV numbers and one of the best nights of fights in the company’s history. Angelo Pettis Jr and Abbas Abasov both won their respective pro debuts, and both have a very high ceiling. Decariye Rosby won in stunning fashion in a performance that will surely be up for knockout of the year.

According to the company, provisional (subject to revisions) estimates suggest that the Company has pulled in over $211k in revenues over this series of events, with nearly half of that total coming over the past three events.

B2Digital, Inc. (OTC US:BTDG) CEO Bell continued, “With the exception of our July Michigan event, we have seen clear and steady growth from pre-event ticket sales, gate sales, pay-per-view sales, and total event revenues over the past three months. We continue to work toward building a number-one brand in combat sports, and we are confident that B2Digital is on the right path toward that result. We continue to push toward the vanguard in our marketplace, with over 100 professional and amateur fights occurring in the B2FS Cage at our B2FS Events since August. We feature some of the most exciting up-and-coming talent week-in, week-out. BTDG Live Events continue to operate with our strategic brand positioning and distribution technology and partnerships. In short, our past three months have exceeded expectations, and we are very excited about how we have positioned the company as we move toward 2023.”

World Wrestling Entertainment Inc. (NYSE:WWE) is an integrated media and entertainment company. The firm is engaged in the production and distribution of content through various channels including the premium over-the-top network monetized through license arrangements or through direct-to-consumer subscriptions, content rights agreements, premium live event programming, filmed entertainment, live events, licensing of various WWE themed products, and the sale of consumer products featuring its brands. It operates through its Media, Live Events, and Consumer Products segments.

The Media segment reflects the production and monetization of long-form and short-form video content across various platforms including WWE Network, broadcast and pay television, digital and social media, as well as filmed entertainment. The Live Events segment revenues consist of ticket sales and revenues from events for which it receives a fixed fee, as well as the sale of travel packages associated with the firm’s global live events. The Consumer Products segment is engaged in the merchandising of WWE branded products, such as video games, toys, and apparel, through licensing arrangements and direct-to-consumer sales.

World Wrestling Entertainment Inc. (NYSE:WWE) recently announced a continent-wide talent search to find Africa’s next WWE Superstar. Interested candidates will be asked to submit a video highlighting their potential to become a WWE Superstar. Successful applicants will be invited to participate in the Lagos tryout in February 2023. A select number of tryout participants will then be awarded an all-expenses-paid experience to continue their tryout journey alongside current and prospective WWE Superstars ahead of WrestleMania 39 in Los Angeles in April 2023. A full-time WWE developmental contract may be offered to the top-performing participants who will then begin their new career at the world-class WWE Performance Center in Orlando, Florida.

“Africa is a focal point of our renewed global recruitment talent strategy,” said James Kimball, WWE Head of Talent Operations and Strategy. “This initiative, in partnership with SuperSport, will launch what we envision becoming a year-round, multi-country effort to identify talent that will resonate with our passionate fanbase.”

While this is a clear factor, it has been incorporated into a trading tape characterized by a pretty dominant offer, which hasn’t been the type of action WWE shareholders really want to see. In total, over the past five days, shares of the stock have dropped by roughly -3% on above average trading volume. All in all, not a particularly friendly tape, but one that may ultimately present some new opportunities. WWE shares have been relatively flat over the past month of action, with very little net movement during that period.

World Wrestling Entertainment Inc. (NYSE:WWE) managed to rope in revenues totaling $328.1M in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 23.6%, as compared to year-ago data in comparable terms. In addition, the company has a strong balance sheet, with cash levels exceeding current liabilities ($443.5M against $425.2M).

Other key names in the space include DraftKings Inc. (Nasdaq:DKNG), Madison Square Garden Sports Corp. (NYSE:MSGS), Churchill Downs Inc. (Nasdaq:CHDN), and Xtreme Fighting Championships (OTC US:XFCI).

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Published by Steve Hackney

Steve Hackney is a corporate finance professional with over 14 years of experience in cash management and investing. He earned a Bachelor of Science in Finance from Florida State University and holds a Certified Treasury Professional certification. Steve lives in Orlando, Florida with his family.