In the 1950s, Graham taught us that the market is a “voting machine” in the short run and a “weighing machine” in the long run. Right now, the voting machine is broken on StubHub (NYSE: STUB). Since its September 2025 IPO, the stock has been discarded like a losing parlay ticket, trading nearly 50% below its debut price.
But if we strip away the one-time IPO “accounting gore” and weigh the actual operating earnings, we find a business that looks less like a tech failure and more like a high-margin toll bridge at a steep discount.
1. The Earnings “Mirage” (Normalizing the 10-Q)
If you look at the Q3 2025 10-Q, you’ll see a terrifying $1.37 billion operating loss. For a value investor, this is the first filter. A closer look reveals a $1.4 billion one-time non-cash stock-based compensation (SBC) charge triggered by the IPO.
To find the true “Owner Earnings,” we must normalize the EBIT.
- Reported Operating Loss (9M 2025): $(1,316) million
- Add back IPO-related SBC: $1,400 million
- Normalized 9M EBIT: $84 million
On a run-rate basis, the business is generating roughly $112 million in annual EBIT today. However, the real value isn’t in today’s “messy” numbers, but in the structural shift coming in 2026.
2. The 2026 Catalyst: From Secondary to Primary
The “Deep Value” thesis for StubHub hinges on its transition from a pure reseller to a Direct Issuance partner.
- The MLB Partnership: Starting in 2026, StubHub becomes the official “Direct Issuance” partner for Major League Baseball. This allows them to sell primary tickets (the first sale) directly.
- The High-Margin Ad Stack: StubHub is finally turning on its advertising engine. Like Amazon and Uber before it, StubHub is sitting on high-intent data. Their “Retail Media” play allowing teams and sponsors to bid for placement carries nearly 80-90% margins.
The Projections: Analysts are modeling 2026 revenue at $2.6 billion. As the business scales and marketing spend as a percentage of revenue stabilizes, a 20% EBIT margin is conservative for a mature marketplace. That yields a forward EBIT of ~$520 million.
3. The “Bargainvest” Valuation
Let’s look at the Enterprise Value (EV) through a Buffett lens:
- Market Cap (at $14/share): ~$4.4 billion
- Net Debt: ~$1.1 billion
- Enterprise Value: $5.5 billion
| Metric | 2025 (Normalized) | 2026 (Forward Estimate) |
| EBIT | $112M | $520M |
| EV/EBIT Multiple | 49x | 10.6x |
Buying a dominant, moat-protected marketplace at 10x EBIT is where the margin of safety lives. For comparison, Live Nation (LYV) rarely trades below 15-18x EBIT, despite having a more capital-intensive business model (venues/festivals).
4. Solvency and the “Safety” Check
A classic value play is only a deal if the debt doesn’t kill you first.
StubHub used its IPO proceeds to slash its debt by $750 million. Their annual cash interest cost has dropped to roughly $99 million.
Even with 2025’s depressed normalized EBIT of $112M, they are covering their interest. Once the 2026 earnings power kicks in ($500M+ EBIT), their Interest Coverage Ratio jumps to a fortress-like 5x.
The Verdict: A Graham-Style Arbitrage
StubHub is currently suffering from “IPO Indigestion.” The market is distracted by legal headlines and the massive GAAP loss. But for the investor who can see the $500M+ EBIT engine hiding behind the 2025 smoke, this is a rare opportunity to buy a “toll bridge” while the toll collector is undergoing a renovation.
Margin of Safety: At $14, I am paying for the legacy business and getting the MLB partnership and Ad-revenue growth for free.
BargaInvest Capital 
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