Is Eventbrite Stock a Buy?

As a ticketing platform for events, Eventbrite (EB 0.39%) suffered mightily from the coronavirus pandemic's effects. The company's 2020 net revenue was down 68% from 2019.

With coronavirus vaccinations rolling out, is Eventbrite poised for a comeback in 2021? Let's look at how the company is faring currently, as well as its plans for the future, to assess if now is the time to buy.

Image source: Getty Images.

Eventbrite in the pandemic

Eventbrite makes its money by charging service fees on every ticket sold through its platform for non-free (i.e. paid) events. These events are posted by the organizers, referred to as "creators" by the company.

This model allowed Eventbrite to steadily grow revenue over the past few years. Then, the pandemic struck. When in-person events evaporated last year from the effects of a global lockdown, ticket sales plunged, and with it, Eventbrite's revenue.

Data by YCharts.

The company's revenue bottomed out in the second quarter of 2020. Since then, paid ticket sales gradually rose thanks to online-only and small, pandemic-safe in-person events.

Data source: Eventbrite, Inc.

Signs of a recovery continued into 2021. On March 8, Eventbrite reported the number of paid tickets in February rose 15% in the U.S. and 23% internationally compared to January.

These signs are encouraging, but even if first quarter results reveal continued recovery, Eventbrite's revenue and paid ticket volume will still require some time to return to pre-pandemic levels. In 2019, the volume of paid tickets sold on Eventbrite was 109.4 million. The company had less than half of that in 2020 with just 47.1 million.

This reality makes the health of Eventbrite's balance sheet particularly important if it's to weather the gradual return to pre-pandemic event activity. Here, Eventbrite has done a solid job.

Exiting the fourth quarter, the company's total assets were $795.7 million with $505.8 million of that in cash and equivalents. Total liabilities were $480.1 million. As a result, Eventbrite stated it's in a position to meet its anticipated cash needs for at least the next 12 months, while event activity slowly ramps up.

The company's future plans

To their credit, Eventbrite's management team is not idly waiting for the recovery. They revised Eventbrite's growth strategy in light of the pandemic. The new strategy focuses on the segment of creators who host events on a frequent basis, usually monthly.

Eventbrite generated over two-thirds of its 2020 total ticket fees from these frequent creators. These creators operate using a number of different software. Eventbrite seeks to fulfill their needs by evolving its platform to reduce creator reliance on other tools.

To that end, Eventbrite put renewed focus around its self-serve business in lieu of its sales channel. In 2019, 98% of creators signed up on their own, so this strategy makes sense.

The caveat is that, historically, Eventbrite generated about half its revenue from creators using the company's self-service ticketing platform, and the other half from creators coming through the sales channel. The new strategy will affect revenue but also reduce costs, such as paying sales commissions, so it's a smart move during this recovery period.

To gain some insight on the new strategy's impact, here's a comparison of creator and event numbers in 2019 and 2020.

Data source: Eventbrite, Inc.

Despite nearly a third fewer creators in 2020, the number of events proved close to pre-pandemic levels. This indicates many of the creators who left the platform weren't contributing many events.

The key, then, is the number of participants per event. Once remaining in-person restrictions are removed and consumers feel comfortable returning to venues, paid ticket volume will increase, helping Eventbrite's revenue.

The final verdict

The company's steady increase in paid tickets point to Eventbrite's resiliency in remaining a platform of choice among creators and consumers. Its focus on self-serve frequent creators has the potential to get the company through this recovery time by reducing costs while strengthening a key segment of its user base.

Eventbrite's 2019 financial results show what the company is capable of. As more of a consumer discretionary spend, Eventbrite will require time to return to over 100 million paid tickets, but people around the world will be hungry to go back to in-person events after a year off.

This pent-up demand, combined with the company's solid balance sheet and recovery trend, means Eventbrite is well-positioned to bounce back post-pandemic. These factors make Eventbrite a buy for the patient investor.