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Is This Hot September IPO Breaking Down in November?

By Rick Munarriz - Nov 13, 2018 at 9:30AM

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Eventbrite was trading as much as 75% higher days after going public, but an uninspiring first quarter as a public company threatens to turn the high-flying debutante into a broken IPO.

Eventbrite (EB 4.67%) was one of the market's hottest debutantes when it went public at $23 in late September, but now it's going the other way. A mixed showing in its first quarter as a public company -- posted shortly after Monday's market close -- isn't helping. Coming through with better-than-expected revenue growth isn't going to draw much of a crowd when guidance for the new quarter calls for sharply decelerating growth on the top line.

The online ticketing specialist closed 59% higher on its first day of trading, peaking at a 75% gain a few days later. Eventbrite didn't have a problem swirling up enthusiasm, armed with heady growth and a business model rich with hype-worthy buzzwords including cloud computing, social media, and millennial magnetism. The general market weakness in recent weeks has weighed on Eventbrite's coming-out party, and now the stock finds itself another bad trading day or two away from becoming the market's next broken IPO.

Eventbrite ticket reservation interface on a website.

An Eventbrite interface. Image source: Eventbrite.

RSVP for a turnaround party

Eventbrite seemed to have all of the winning ingredients when it went public seven weeks ago. Revenue soared 51% last year, as Eventbrite continues to establish itself as the free or cost-effective platform of choice for online event registrations. A whopping 3 million events were listed on Eventbrite last year, ringing up 203 million ticket reservations for more than 700,000 organizers. The platform is as intuitive as it is sticky, checking in with a 97% retention rate in 2017. 

Revenue surged 45% in Monday afternoon's report, clocking in at $73.6 million for the third quarter. The growth isn't all organic as Eventbrite continues to acquire smaller established platforms, but the top-line burst still tops the $71.7 million that analysts were targeting. Eventbrite's loss widened during the period, but investors aren't buying into this fast-growing story for its bottom-line results. 

Eventbrite is succeeding, even as its stock price is retreating. The number of paid tickets sold during the quarter soared 32% to 23.9 million. Net revenue per ticket increased 9.7% to hit $3.08 for the period.

Catalysts for continuing growth keep coming. Eventbrite teamed up with YouTube last month, as the leading video-streaming hub becomes the latest platform to integrate Eventbrite listings into its app. This quarter also saw the launch of Eventbrite Music, a platform that should help expand its already booming presence for promoters of music concerts and festivals. 

Guidance for the fourth quarter isn't as inspiring. Eventbrite is forecasting revenue to clock in between $72 million and $74 million for the holiday-containing period, a slight sequential dip at the midpoint -- and a problematic 15% to 18% gain over the $62.7 million it served up a year earlier. A company can't afford to disappoint investors in its first financial release as a public company, and that's just what Eventbrite did with its soft guidance. The show's not over, but after a rough opening number it's going to be hard for investors to get excited about the rest of the performance, much less cheer for an encore.  

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