With live events making a strong comeback after the Covid-19 pandemic, many investors are wondering if now is a good time to buy shares of Live Nation Entertainment (NYSE: LYV), the world’s largest live entertainment company. Live Nation’s stock price has rebounded significantly from its March 2020 lows and is currently trading near all-time highs. In this detailed analysis, we’ll examine Live Nation’s business, financials, growth prospects, risks, and valuation to help investors determine if LYV stock is a buy right now.
What does Live Nation Entertainment do?
Live Nation Entertainment is the world’s leading live entertainment company. The company was formed in 2005 after Live Nation merged with Ticketmaster. Live Nation owns Ticketmaster and sells tickets to its own events as well as third-party events. The company has four main business segments:
- Concerts: Promotes, produces, and operates live music events globally. This includes festivals, amphitheaters, arenas, stadiums, theaters, clubs, and more. Live Nation sells tickets, secures sponsorships, and provides other services for over 40,000 live events per year.
- Ticketing: Provides ticket sales, resale services, marketing, and distribution services through the Ticketmaster brand. Processes over 500 million ticket transactions per year across Live Nation’s own events and third-party events.
- Sponsorship & Advertising: Sells international, national, and local sponsorships and placement of advertising including signage, promotional programs, rich media offerings, and ads across Live Nation’s venues, events, and websites.
- Artist Nation: Provides management services to music artists for concert tours, merchandising, sponsorships, and licensing. Manages over 500 artists currently.
Live Nation sells over 500 million tickets per year and has nearly 45 million customers in its database. The company owns, leases, or has exclusive booking rights for over 350 major venues worldwide. Live Nation puts on more live events and sells more tickets than any other company.
How has Live Nation performed financially?
The Covid-19 pandemic devastated Live Nation’s business in 2020 as live events were canceled for months. But the company is strongly rebounding now that live events have returned. Here are some key stats on Live Nation’s recent financial performance:
- Revenue plummeted 84% year-over-year in Q2 2020 during widespread lockdowns.
- Net loss of $1.6 billion in 2020 compared to net income of $69 million in 2019.
- Revenue rebounded to $6.3 billion in Q2 2022, up by 363% versus Q2 2021.
- Net income of $118 million in Q2 2022 compared to a loss of $504 million in Q2 2021.
- Operating income of $159 million in Q2 2022 versus an operating loss of $584 million in Q2 2021.
- Adjusted operating income (excludes stock compensation) was a record $461 million in Q2 2022.
Live Nation has over $4 billion in liquidity including $960 million in cash. The company believes 2022 could be its highest revenue year ever if current trends continue. Live events have strong pent-up demand post-pandemic. Live Nation’s results in recent quarters show its business rebounding rapidly now that live events are back.
What are Live Nation’s growth opportunities?
Live Nation has several promising growth drivers that could boost the company’s financial results over the next five years:
- Pent-up demand for live events – With most live events shut down from 2020-2021, fans are now eager to buy tickets and attend concerts. Live Nation believes it can increase ticket prices due to this demand.
- Expansion into new markets – The company is expanding aggressively into Latin America, Asia, Africa, and other markets with growing music fan bases and rising consumer spending power.
- Partnerships with brands – Live Nation is partnering with major brands like Verizon, American Express, and T-Mobile for multi-year sponsorship deals of its venues, festivals, and tours.
- Ecommerce growth – The company aims to grow ticket fee-free direct-to-consumer ticket sales through its websites which reached $6 billion in 2021.
- Technology improvements – Investments in digital ticketing, contactless entry, and data analytics help drive greater convenience, personalization, and monetization.
Live Nation believes it can grow its core business by 10% annually post-pandemic. It also aims to expand operating margins back to 2019’s levels in the high-single digits over time. Continued growth in live events and rising profitability could boost Live Nation’s stock in coming years if the company meets these targets.
What are the risks and challenges facing Live Nation?
While Live Nation’s growth prospects look strong right now, investors should be aware of these potential headwinds for the business:
- Recession risks – A potential recession could reduce consumer discretionary spending on live events. However, Live Nation’s results held up well during prior recessions.
- Security concerns – Safety incidents or attacks at Live Nation events could create liabilities and reduce ticket sales.
- Competition – Rival concert promoters like AEG Presents and upstart ticketing platforms could take market share.
- Unforeseen disruptions – New COVID variants, natural disasters, or other unforeseen events could force event cancellations.
- Regulatory scrutiny – Live Nation faces ongoing antitrust probes related to its huge size and Ticketmaster dominance.
However, Live Nation’s diversified business across concerts, ticketing, sponsorships, and artist management helps mitigate risk. The company has proven resilient through past disruptions and its comprehensive live event portfolio provides some protection during indu
Is Live Nation stock a good value right now?
At around $80 per share currently, LYV trades at a forward P/E of around 35 based on estimated 2023 earnings. That’s well above the S&P 500 average forward P/E of 17. However, Live Nation’s growth outlook of 10%+ annual revenue growth and expanding margins seems to support a higher-than-average valuation.
Wall Street analysts expect Live Nation to grow earnings per share by 19% annually over the next five years. That growth rate typically warrants a higher P/E ratio. Here’s a look at Live Nation’s valuation versus its own five-year averages and the S&P 500:
Valuation Metric | LYV Current | LYV 5-Year Average | S&P 500 Index |
---|---|---|---|
Forward P/E | 35 | 111 | 17 |
Price / Sales Ratio | 1.7 | 1.4 | 2.3 |
Price / Book Ratio | 12.7 | 17.4 | 3.7 |
Price / Cash Flow Ratio | 10.8 | 65.7 | 13.6 |
Live Nation looks reasonably valued on a P/S and P/CF basis versus historical averages. The stock isn’t cheap, but earnings growth could justify the current valuation if Live Nation hits its targets. The company also pays a small dividend yielding around 2% annually.
What are Wall Street analysts saying about Live Nation?
Here’s a sampling of recent bullish analyst commentary on Live Nation:
- Guggenheim boosted its price target to $105 per share, seeing “robust demand for live entertainment.”
- Morgan Stanley raised its target to $110, noting Live Nation’s “structurally advantaged business model.”
- JPMorgan sees “tailwinds to demand” supporting an $80 billion live events market by 2030.
- Jefferies expects continued momentum, assigning a buy rating and $95 target.
- Citigroup forecasts 13% annual growth as Live Nation takes market share, setting a $92 target.
The average analyst price target on LYV is around $98 currently, representing about 22% upside from current levels. Most analysts are bullish on Live Nation’s post-pandemic rebound and see years of growth ahead.
Should you buy Live Nation stock?
Live Nation Entertainment looks like an appealing investment right now for several reasons:
- The business is rebounding rapidly as live events return.
- Pent-up fan demand creates strong tailwinds.
- Ongoing growth opportunities in new markets and ecommerce.
- Improving profitability expected over the next few years.
- The stock trades at a reasonable valuation given growth prospects.
On the downside, recession risks, competition, and regulatory oversight create some uncertainty. But the long-term outlook looks positive supported by Live Nation’s industry dominance and the power of its unrivaled live events portfolio.
For investors seeking exposure to the rapid growth expected in the global live entertainment industry over the next decade, Live Nation looks like an attractive buy-and-hold investment at current levels.
Conclusion
Live Nation Entertainment is the unrivaled leader in live events and ticketing worldwide. With consumers flocking back to live concerts, festivals, and shows post-pandemic, Live Nation is seeing its business rebound vigorously. The company has multiple avenues for continued growth by expanding into new geographic markets, growing its ticket sales, and partnering with major brands.
At around $80 per share, LYV stock isn’t cheap but looks reasonably valued given the company’s growth trajectory. Wall Street analysts see substantial upside potential over the next 12 months. For long-term investors, Live Nation looks like a compelling buy right now to capitalize on the powerful comeback of the live entertainment industry.