In Sept. 2018, event ticketing platform Eventbrite (NYSE:EB) went public at $23 per share -- pricing at the high end of its increased range. Investor appetite for the stock was strong with shares surging 59% on the first day of trading. But a succession of earnings misses sent the stock down to a low of $15 per share before recovering to about $22 as of this writing.

While it might be tempting with shares currently trading below the IPO price, I wouldn't rush to buy Eventbrite just yet. Here's why.

Silhouetted cameramen at a concert

Image source: Getty Images.

First, the opportunity

Eventbrite processes ticket sales for small- and medium-size live experiences. It's not limited to just concerts, since tours, workshops, and presentations are included in the live-experience niche. In its top 12 markets in 2018, Eventbrite estimates 1.1 billion tickets were sold in the small-to-medium event range. Those tickets generated $3.2 billion in gross ticket sales (not vendor fees), and that should offer some perspective on the size of the company's market opportunity just in these top regions. Globally, it estimates the addressable market is $14 billion.

Eventbrite processed around 108 million paid tickets over the past 12 months, and the 27 million tickets processed in the third quarter of 2019 generated net revenue of $3.05 per ticket. That was down 1% year over year, but higher ticket volume drove Eventbrite's quarterly revenue up 11% to $82.1 million during the period.

So there is still room for growth in Eventbrite's core service. The company also has an opportunity to grow via add-on services such as event-related merchandise sales, just one area management is pursuing.

The struggle up to this point

Eventbrite acquired Ticketfly in 2017 for $200 million. While Eventbrite targets event creators, Ticketfly's primary customers were venues and music promoters. From the beginning, Eventbrite's plan was to shut down Ticketfly and roll everything into its namesake platform. 

Nearly three years after the acquisition, the integration is only now approaching completion. It has been an arduous process with great effort spent retaining Ticketfly customers rather than organically growing the company. A data breach announced in June 2018 also complicated matters and cost the company $6.6 million.

Since Ticketfly customers are typically larger than those Eventbrite serves, retention is crucial. CFO Lanny Baker elaborated during the earnings call, "Although we have substantially completed the migration of all Ticketfly customers, and we saw an improvement in music revenue growth in the third quarter of 2019, we're cautious about the outlook for certain newly-migrated creators." But in the third quarter, music-related ticketing (Ticketfly's bread and butter) was flat year over year. In other words, integration may not be going as planned.

The acquisition has hurt growth, at least in the short term, but the stock has also stumbled after consistently missing analysts' earnings estimates. That said, the company issues its own quarterly guidance and consistently hits or beats it.

Quarter Revenue
Guidance
Actual Revenue Adjusted EBITDA
Guidance (Loss)
Actual Adjusted
EBITDA (Loss)
Q4 2018 N/A $75.9 million N/A $7.3 million
Q1 2019 $80 million to $84 million $81.3 million $4 million to $8 million $5.0 million
Q2 2019 $74 million to $78 million $80.8 million ($4 million) to $0 million $0.9 million
Q3 2019 $74 million to $78 million $82.1 million ($9 million) to ($5 million) ($6.5 million)

Data from Eventbrite. Table by author.

Analysts are expecting the company to generate $78.7 million of revenue in the fourth quarter, which would be at the high end of management's guidance.

For now

The silver lining with the Ticketfly acquisition is that it's almost finished, and the debt from that deal is already paid off. Investors can now see for themselves how worthwhile an endeavor the deal will prove to be. Eventbrite guided for Ticketfly's acquisition to begin paying off in 2020, and management has established some credibility by consistently hitting its earnings guidance.

For this year, Eventbrite announced it will be cutting costs and focusing on certain international markets. I'll be tracking customer retention from the Ticketfly acquisition and organic revenue growth before investing. Those cost reductions should also make their way to the bottom line and improve profitability. The great thing about investing in growth stocks is that you won't miss the boat completely by waiting a couple of quarters -- great growth stories play out for years.