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Bear of the Day: Live Nation Entertainment, Inc. (LYV)

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Live Nation (LYV - Free Report) transformed itself into a global titan of the live music entertainment world. Then, like many industries that count on people being near each other, the coronavirus changed everything. And unfortunately for Live Nation and the music industry, crowded concerts might be some of the last things to come back even as the economy slowly returns to something close to normal.

The Day the Music Died…

The company has edged toward monopoly power in the live music space. Highlighting its sway over the industry, LYV in December 2019 reached an agreement with the Justice Department to resolve concerns that it violated a 2010 antitrust settlement, which originally allowed it to merge with Ticketmaster.

Live Nation operates three different core businesses: Ticketmaster, Live Nation Concerts, and Live Nation Media & Sponsorship. Ticketmaster is LYV’s massive ticket sales platform, and the company also owns venues around the country. On top of that, Live Nation is an event promotor.

Overall, Live Nation operates a lucrative business in the digital music age because even though people pay to use Spotify (SPOT - Free Report) and Apple Music (AAPL - Free Report) , there is not enough money for most artists to make a good living. Therefore, bands, big and small, increasingly turn to tours and concerts, with live shows driving money making for the musical talent.

Live Nation did $11.5 billion in revenue in 2019, and the company was projecting another record-breaking year in 2020, and then the coronavirus brought its business to a screeching halt. LYV’s first quarter revenue fell 21% and its second quarter showcased the full and hopefully temporary destruction of the live music world, with Q2 revenue down 98% from $3.16 billion in the year-ago period to $74 million.  

 

 

 

 

 

 

 

 

 

 

What’s Next?

Live Nation’s executives are optimistic that things will start to bounce back in 2021, pointing to outdoor shows next summer as a possible turning point. “Our expectations for a robust outdoor summer season in 2021 are also reinforced by the two-thirds of fans keeping their tickets for canceled festivals so they can go to next year’s show, along with strong early ticket sales for festivals in the UK next summer,” the firm wrote in prepared remarks last quarter.

But the road back to crowded shows, even in an outdoor setting, seems somewhat uncertain at the moment, and bands and venues are also reportedly set to face burdens in terms of insurance and potential lawsuits.

Zacks estimates call for LYV’s third quarter revenue to sink 94%, with the fourth quarter projected to come in 84% lower. Meanwhile, the company is projected to swing from adjusted earnings of $0.71 a share in the year-ago period to a loss of -$2.14 a share in the third quarter.

 

 

 

 

 

 

 

 

 

Bottom Line

As a whole, Live Nation is projected to swing from a small adjusted loss of -$0.02 per share in FY19 all the way to -$7.81, on 78% lower revenue in FY20. That said, estimates call for the firm’s FY21 revenue to soar 225% above our current year estimate of $2.57 billion all the way up to $8.34 billion. However, that might be too optimistic for some investors.

On top of that, Live Nation’s earnings revision trends help it grab a Zacks Rank #5 (Strong Sell) at the moment. Therefore, those who are high on the near-term future of the industry might want to wait for Live Nation to provide updates, with it expected to release its Q3 results on October 29.

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