Stanley Druckenmiller is one of the most successful investors in history. The longtime hedge fund manager who ran Duquesne Capital Management from 1981-2010 and has since invested through his family office is closely followed by investors because of his stellar track record. In the three decades he was active, his fund generated an average annual return of more than 30%, and he never had a losing year, successfully steering his fund through both the dot-com bust and the great financial crisis.
Druckenmiller was a protégé of George Soros and was involved in the famous bet that broke the British pound. He is known for a macroeconomic focus, making large bets when he is confident in the investment.
Like other billionaire investors, Druckenmiller reveals his quarterly moves every three months in his 13-F filings with the SEC, and he was active once again in the third quarter. Among his biggest buys were:
- Insmed
- iShares MSCi Emerging Markets ETF
- Amazon
His top three sells were:
- Philip Morris
- Entegris
- Coherent
While it didn't crack the top three, Druckenmiller's most intriguing purchase in the quarter may have been StubHub Holdings (STUB +5.04%), the ticket resale marketplace and former eBay subsidiary, which IPO'd in the third quarter.
Druckenmiller bought 4.26 million shares of StubHub in the quarter. It's unclear if he participated in the IPO, or if he bought them in the open market after the debut.
Thus far, StubHub has not performed well on the market. After listing on Sept. 16 at an IPO price of $23.50, the stock has slumped and hit a new low on Nov. 19 at under $11.
Despite the pullback, is Druckenmiller right about StubHub? Let's take a look at what the e-commerce stock has to offer today.
Image source: Getty Images.
Is StubHub worth the price of admission?
StubHub has long been the market leader in the ticket resale industry, launching early in the days of the internet back in 2000, pioneering the industry. The company probably would have gone public earlier in its history, but eBay acquired it for $310 million.
In a number of ways, the investment case for StubHub is evident. The product fills a clear need, and by creating a two-sided marketplace, it can collect fees on the sales. It's a scalable business model, where the technology underpinning the platform is the main expense. As it grows, its profit margins should get wider.
However, over the years, StubHub has faced more competition from platforms like LiveNation's Ticketmaster and other pure-play ticket marketplaces like SeatGeek.
StubHub just delivered its first results as a publicly traded company, with the stock tumbling on the news. Gross merchandise sales (GMS) rose 11% to $2.43 billion, with revenue up 8% to $468.1 million, topping the consensus at $451.4 million. Adjusting for the impact of Taylor Swift's Eras Tour, GMS was up 24%.
Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) was up 21% to $67.5 million, and its adjusted EBITDA margin expanded from 13% to 14%. Its generally accepted accounting principles (GAAP) were distorted by the IPO, but those results show the business is moving in the right direction, with significantly faster growth than expected.
However, Wall Street was disappointed with a lack of fourth-quarter guidance, and most analysts lowered their price targets on the stock following the report.
Additionally, just this week, the Financial Times reported that the U.K. was planning to ban the selling of tickets above face value, which would put a significant dent in StubHub's U.K. business. The U.K.'s Competition and Markets Authority also announced an investigation into StubHub for pricing practices, including drip pricing, meaning it withholds information about some fees until later in the buying process, and pressure selling, which included misleading countdown timers.
NYSE: STUB
Key Data Points
What's next for StubHub?
StubHub isn't the growth juggernaut it once was early in its history, and pressure in the U.K. and consumer weakness in the U.S. could further slow the company over the next year.
At a market cap of $4 billion, the stock looks reasonably priced, at 15 times run-rate EBITDA, but it will have to reassure investors about its growth over the coming year in order for the stock to recover.
