Live Nation Entertainment, Inc (NYSE:LYV) is a global live entertainment conglomerate that formed from the merger of Live Nation and Ticketmaster in 2010. The company was on a steady growth trajectory until the pandemic shut down live events in 2020. With the economy reopening, Live Nation Entertainment is quickly growing into a $20 billion juggernaut.
It’s no surprise that Live Nation share price suffered in 2020. But the amount LYV stock fell drew gasps from shareholders. The trigger? An 84 percent decline in revenue.
By 2021, the company capitalized on resurgent demand for live events – summer tours led to sold out shows. Now the question arises: is Live Nation stock a buy?
Can The Largest Live Entertainment Firm Return?
Live Nation Entertainment is the world’s largest live entertainment company. It promotes, operates, and manages ticket sales for major events around the world, especially in the United States.
Ticketmaster grew to become the largest event ticketing platform, while Live Nation grew as the preeminent concert and tour promoter. The combination of the two proved to be a dominating force in its industry and helped the company to grow steadily in recent years.
As soon as the Ticketmaster/Live Nation merger was cemented, the company went on a buying spree throughout the 2010s. It acquired Voodoo Music + Arts Experience, C3 Presents, Bonnaroo Music and Arts Festival, and Founders Entertainment. The company’s subsidiaries include Jay-Z’s Roc Nation.
It also bought controlling interests in a variety of live music festivals and promotors. Its business segments are concerts, ticketing, and sponsorships, and the company owns a variety of venues, acts, and more. As a vertically integrated entertainment company, LYV can better control costs and therefore margins.
But that doesn’t necessarily guarantee it a profitable business.
Will Live Nation Revenues Rebound?
The first quarter of 2021 was a dismal performance, with $290.6 million in revenue, compared to $1.3 billion in the same quarter of the prior year. That was the final quarter before worldwide shutdowns took effect, and the company took a major hit when major gatherings were closed. This resulted in a net loss of $322.7 million or -$1.44 per diluted share.
Still, the company’s concert pipeline for 2022 is jam-packed as performers and audiences rush to get back outside. Concerts alone have enjoyed a double-digit percentage increase from 2019, and that’s going to help the company dig its way out of a less than stellar balance sheet.
Management focused on a $750 million cost reduction program and $1.5 billion cash management program for 2021.
On the plus side, the company continues to sign new clients, and has added over 5 million fee-bearing tickets so far this year. This leaves the company with just over $3 billion in cash and equivalents heading into the busy summer music festival season.
But much of this success is seemingly already baked into LYV share price, leaving some investors wondering if it’s too late to punch the ticket.
Is Live Nation Stock a Buy?
Live Nation stock could be a bargain at double-digit prices. The company is projected to grow beyond a $20 billion company by year end. Festivals like Bonnaroo, Electric Daisy Carnival, and Rolling Loud all sold out in record time, leading to optimism that live events are back for good.
The company has a lot of clout with its fingers in the pies of big festivals around the world. It’s benefitting from more than just the domestic economic recovery. There’s lots of pent-up demand to attend events in-person.
Nevertheless, the company is still operating at a loss, which means it could be relatively stagnant until Q3 results are announced. So, don’t overlook the risk of this investment – the company is still in a precarious position that depends on both venue availability and talent.
It may need to invest more than analysts estimate to get back to an even keel and convince skeptics to attend live events in person, especially with virtual events fighting to prove their own staying power.
How Anchored Is LYV Balance Sheet To Lenders?
The company holds about $5.3 billion in long-term debt that’s going to weigh its books down for several years to come. Without dividends, investors are speculating on a pure growth play that may never come to fruition for shareholders.
Although Live Nation is bouncing back, it’s still a far cry from its prior operating levels. For example, the first quarter of 2021 only had 664 concerts, compared to 7,095 in the same quarter of the prior year. This might suggest that the buzz about people rushing out to attend events has a sprinkle of marketing attached to it.
Marquee live events like Leeds, and Parklife in the UK, Rhythm and Vines in New Zealand, and Bonnaroo in the U.S. may sell out. But there are fewer live events competing with them, so it’s not necessarily a good gauge.
And the company’s expenses and liabilities are likely to remain high. The music business and live events have high overhead costs. This siphons away capital from growth investments which in turn can hurt profitability.
Is Live Nation Stock a Buy? The Bottom Line
Live Nation Entertainment is the world’s leading live entertainment company. It’s a full-service company that manages venues, acts, and festivals. As the market leader, it has an almost impenetrable moat.
But that didn’t save it when it was forced to shut down operations. And a heavy debt burden added to shareholder woes, precipitating a sharp share price decline.
Live events are on their back though, and LYV share price is reflecting optimism of higher revenues and profits in the near future. For optimists, the upside share price now resides around $90, at which time LYV is fully valued based on a discounted cash flow forecast analysis.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.