On paper, angering pop superstar Taylor Swift could be seen as an extremely poor business decision. With her legions of fans worldwide, Swift represents an economy onto herself. Recently, her sharp criticism of the ticket reselling industry — the core business undergirding Vivid Seats (US:SEAT) — reverberated across the broader entertainment landscape. Yet investors in SEAT stock shouldn’t hit the panic button just yet.
To be fair, circumstances don’t appear fundamentally pleasant for investors of businesses associated with online ticket marketplaces. When Swift last year announced the launch of her highly anticipated Eras tour, retail prices for admission initially ranged between $49 to $449 via Ticketmaster, according to The Guardian. Many would see that as a reasonable expenditure given the Swift’s now-iconic status.
However, a digital snafu on Ticketmaster’s website forced fans to wait in online queues for up to eight hours. Others distressingly found themselves too late to purchase tickets as the site crashed multiple times under the strain of heavy traffic.
Adding insult to injury, scalpers ended up with large swathes of inventory and they quickly took advantage of the unparalleled demand. Several of the tickets were listed for resale on platforms like Vivid Seats for as much as $22,700 each.
Following the debacle and Swift’s sharp response, the U.S. Senate Judiciary committee held an antitrust hearing in January of this year. In a rare act of bipartisanship, both Democrats and Republicans blasted Ticketmaster and parent company Live Nation (US:LYV) for leveraging a monopoly over the ticketing industry.
Vivid Seats came public in October 2021 in a blank-check merger at $10 a share. Unlike the tickets sold on its platform, the SEAT stock price barely went above the IPO price before dropping over several weeks in March and April 2022 and settling into a narrow range between $8.51 and $7.18 a share ever since.
Last month, the firm priced a 16-million-share secondary offering at $8 a share.
Presently on the Fintel Forecast dashboard, the shares have a projected 12-month stock price of $12.36 a piece, almost 67% upside from current levels. Analyst recommendation trends have remained steady for most of the past year.
Though SEAT stock suffers from guilt by association, its underlying financial performance gives little evidence of anxiety. For example, in the company’s first quarter of 2023 earnings report, Vivid posted revenue of $161.06 million, up over 23% against the year-ago result of $130.77 million. In addition, income from operations hit $33.5 million, up 144% year-over-year.
Notably, options traders got into the optimistic act, with SEAT stock representing a standout on Fintel’s screener for unusual stock options volume. Following the close of the June 21 session, call volume hit 1,732 contracts against an open interest reading of 783. On the other side, put volume mustered only 40 contracts against open interest of 601.
Also on that day, options flow data showed strong acquisition demand for call options, a classic indicator of bullish sentiment. Notably, the current put/call ratio for SEAT stock sits at 0.26. Since calls represent bullish wagers, ratios below one indicate optimism.
While the ticket price hikes for Swift’s Eras tour seems outrageously excessive, it’s also a byproduct of simple supply-and-demand. Essentially, the high prices only demonstrate the intense desire to attend the concert.
Further, scalpers also take risks with their inventory acquisition. Should demand for a hot event fall off for any number of reasons, they would most likely have to eat the cost. While a seemingly odious practice, scalping may represent free market capitalism in its purest form.
But if you’re a Swift fan and find yourself in Minneapolis this weekend, Vivid Seats can put you and a friend in front of the stage in field seats for a cool $3,381.
This article originally appeared on Fintel
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