TKO Holdings (NYSE:TKO) stock slipped by 5% on Friday, erasing some of the gains made during the week as investors shifted their focus on Sunday night’s White House UFC match. It retreated to $203, down by over 6% from its highest point this month.

TKO Stock Rose Slipped Ahead of UFC White House Matches

TKO Holdings stock has been in a steady uptrend over the past few weeks as investors position themselves ahead of the upcoming UFC event on the White House South Lawn. It then pulled back by almost 5% on Friday.

This is a major spectacle that will lead to more brand visibility for UFC, whose CEO, Dana White, was a top Trump donor. According to the New York Times, (NYSE:NYT), UFC has spent over $60 million to set the event up. Over 4,000 people will watch the event in the Southern Lawn, and millions more at home.

Still, the event will likely lose UFC and TKO, its parent company, money. It has already spent over $60 million in preparing for the event. In a statement, Mark Shapiro, the head of TKO Group said that the brand exposure will be worth it. 

The event comes at a time when the TKO Group stock has remained under pressure this year. It has dropped by 2.70% since January, while the S&P 500 and Nasdaq 100 indices have soared by double digits. 

The most recent results showed that the company's business was doing well. Its revenue jumped to $1.59 billion from $1.268 billion in the same period last year. Most of this revenue, $655 million, came from IMG, its sports marketing business. 

UFC's revenue jumped to $401 million from $359 million, while WWE rose from $391 million to $475 million. Its adjusted EBITDA jumped to $549 million from the previous $417 million. The average estimate is that its revenue will jump by 21% this year to $5.76 billion, followed by $5.81 billion next year. 

Valuation Concerns Remain

A key challenge for the TKO stock is that the company has become highly overvalued, which likely explains why the short interest has jumped to 14%. 

TKO Holdings trades at a forward price-to-earnings ratio of 48, much higher than the communications sector median of 13. In contrast, a company like Sandisk (NASDAQ:SNDK), which is growing by triple digits, has a PE multiple of 30. Similarly, Nvidia (NASDAQ:NVDA), which is the flagship name in the AI industry, has a multiple of 22.

Technically, the stock has formed a giant bearish engulfing pattern. This pattern happens when a large bearish candle fully covers a smaller bullish one. It is one of the most common bearish reversal signs in technical analysis. Therefore, there is a likelihood that it will continue falling this week as investors sell the White House event news.

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