Market sentiments are being crushed under anticipations of an economic slowdown, triggered by the macroeconomic headwinds and the recent financial system chaos. Given this backdrop, the travel stock Hall of Fame Resort & Entertainment Company (HOFV), with mounting losses and high debt obligations, could be avoided now. Let us delve deeper to find more.

HOFV is a resort and entertainment company that owns the premier sports, entertainment, and media enterprise surrounding the Pro Football Hall of Fame in Canton, Ohio.

HOFV currently has a relatively high level of debt obligation. A higher debt obligation increases the risk of investing in a loss-making company. Moreover, HOFV’s insufficiency to generate adequate cash flows to refinance the indebtedness could affect its financial position and the result of its operation.

For the year ended December 31, 2022, its net cash used in operating and investing activities stood at $4.89 million and $112.13 million, respectively. Moreover, its total liabilities stood at $265.04 million for the year that ended December 31, 2022, compared to $132.71 million for the year that ended December 31, 2021.

Given HOFV’s performance in the last quarter, investors seem bearish about the stock. The stock has plunged 63.6% over the past year and 33% over the past six months to close the last trading session at $9.28.

Blaming the economy for the downward movement of the company’s share price, President and CEO Michael Crawford, commented, “The global pandemic, supply chain issues, international conflicts and wars, are all factors that placed outside pressure on our stock price, much like they have on the rest of the stock market.”

Given its weak fundamentals and the current volatile market dynamics, the stock could plunge further.

Here are the factors that could influence HOFV’s performance in the upcoming months:

Disappointing Financials

HOFV’s revenue decreased 3.3% year-over-year to $3.10 million in the fourth quarter that ended December 31, 2022. Its loss from operations widened 5.1% year-over-year to $8.20 million for the same quarter.

HOFV’s adjusted EBITDA loss for the fiscal fourth quarter that ended December 31, 2022, widened 21.6% year-over-year to negative $5.47 billion. The net loss attributable to HOFV shareholders stood at $18.51 million, compared to an income of $9.35 million in the previous year’s period.

Its net loss per share came in at $3.36, compared to net income per share of $8.64 in the same quarter in 2021.

Unfavorable Analyst Estimates

For the fiscal third quarter (ending September 2023), HOFV’s EPS is expected to decline 22.2% to a negative $2.42.

For the second quarter ending June 2023, its EPS is expected to come in at negative $1.44. Street expects its revenue for the same quarter to come in at $9 million. It failed to surpass Street revenue estimates in three of the trailing four quarters.

Stretched Valuation

In terms of forward EV/sales, HOFV is trading at 8.55x, 661.4% higher than the industry average of 1.12x. Its forward price/sales multiple of 1.75 is 106.7% higher than the 0.85 industry average.

Low Profitability

HOFV’s trailing-12-month gross profit margin and net income of negative 156.44% and 287.14% compares to the 35% and 4.56% industry averages, respectively. Its trailing-12-month ROCE, ROTA, and ROTC of negative 23.63%, 10.06%, and 6.49% compares to the 11.79%, 4%, and 6.35% industry averages, respectively.

POWR Ratings Reflect Bleak Outlook

HOFV’s POWR Ratings reflect this bleak outlook. The stock has an overall F rating, equating to a Strong Sell in our proprietary rating system. The POWR Ratings are calculated considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. It has an F for Value, in sync with its stretched valuation. The F grade for Quality is consistent with its lower-than-industry profitability.

Also, its D grade for Sentiment is in sync with its unfavorable bottom-line estimates.

Within the 22-stock Travel – Hotels/Resorts industry, it is ranked last.

To see the other ratings of HOFV for Growth, Momentum, and Stability, click here.

View all the top stocks in the Travel – Hotels/Resorts industry here.

Bottom Line

The disappointing performance of HOFV in the last quarter of 2022 painted a gloomy picture for the stock. On top of it, the stock is trading below its 50-day and 200-day moving averages of $10.61 and $13.62, respectively, indicating a downtrend. Furthermore, given its massive losses, low profitability, and stretched valuation, it could be wise to avoid this travel stock now.

How Does Hall of Fame Resort & Entertainment Company (HOFV) Stack Up Against its Peers?

While HOFV has an overall F rating, one might want to consider its industry peers, Genting Singapore Limited (GIGNY), Travel + Leisure Co. (TNL), and Bluegreen Vacations Holding Corp. (BVH), which have an overall B (Buy) rating.

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HOFV shares were unchanged in premarket trading Wednesday. Year-to-date, HOFV has gained 15.14%, versus a 7.16% rise in the benchmark S&P 500 index during the same period.

About the Author: Sristi Suman Jayaswal

The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors. More...

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