StubHub Holdings (NYSE: STUB) experienced a sharp decline of 12.3% on Thursday, as investors reacted to second-quarter results that showed robust revenue growth but also highlighted significant expense pressures tied to the World Cup. The stock closed at $7.49, down from the previous session's close, amid heavy trading volume that exceeded the three-month daily average by more than twofold.
The company reported revenue of $573.1 million for the quarter, a 33% increase from the prior-year period and above the $513.3 million consensus estimate from FactSet. Gross merchandise sales (GMS) climbed 34% to $3.1 billion, driven by unprecedented demand for World Cup tickets, which CEO Eric Baker described as a record quarter. However, total costs and expenses surged 37% to $553.6 million, outpacing revenue growth and eroding profitability.
StubHub posted a net loss of $40,000, missing analyst expectations of an 11-cent profit per share. Adjusted EBITDA nearly doubled to approximately $106 million, with a margin of 18%, but the gap between adjusted EBITDA and operating income widened to about $87 million, reflecting the impact of one-time costs.
CFO Connie James attributed the higher customer-service expenses to the scale of the World Cup, noting, "These costs are not representative of our underlying margin structure." The company's full-year guidance remains unchanged, but the path to achieving it requires a significant improvement in second-half performance.
For the second half of the fiscal year, StubHub needs to generate adjusted EBITDA between $222 million and $242 million to meet its annual target of $400 million to $420 million. This implies a sequential increase of 24.6% to 35.8% from the first half, even as GMS is expected to decline to $4.8 billion to $5.0 billion, down from $5.3 billion in the first half.
Analyst reactions were mixed. BofA Securities downgraded StubHub to Underperform, cutting its price target to $7.50 from $11.00. Other firms, including Oppenheimer, Guggenheim, and Evercore ISI, maintained Buy ratings but trimmed their targets. The consensus view now reflects caution over regulatory risks, potential refunds, and intense competitive marketing.
The stock remains 68% below its IPO price of $23.50, and with a market capitalization of $3.25 billion, investor patience is wearing thin. Trading volume reached 16.2 million shares by 14:57 EDT, more than double the average, indicating heightened interest from institutional and retail investors alike.
Looking ahead, the next two quarters will be critical for StubHub. The company must demonstrate that it can convert lower transaction volumes into higher profitability, while also rebuilding trust in its platform. If the World Cup-related expenses prove to be temporary, margins could recover swiftly, but any further setbacks could pressure the stock further.
