It’s the summer of live music, with seemingly every megastar from Taylor Swift to Beyoncé to Bruce Springsteen out on tour in 2023. And few companies are benefiting more than Live Nation Entertainment Inc.
But that doesn’t mean 2024 will be the same extravaganza.
The ticket-selling and concert-promoting giant’s stock plunged as much as 16% Friday after briefly hitting a 52-week high on a Politico report that the Justice Department could file an antitrust suit against Live Nation and its Ticketmaster subsidiary by the end of the year. The company’s ever escalating fees have also come to the attention of the White House and Congress.
“Though Live Nation made pricing changes to increase transparency and improve consumer experiences, we think that the DOJ could take a hard line and potentially sue to unwind its 2010 merger with Ticketmaster, since the initial consent decree was already extended in 2019,” Bloomberg Intelligence analyst Jennifer Rie wrote in a note late Friday.
The company’s shares, which are up 28% this year compared with a 19% gain in the S&P 500, initially rallied after Live Nation reported blow out second-quarter earnings after the bell on Thursday. The stock, which ended the session down 7.8%, is now valued at 76 times trailing earnings, making it pricier than even high-flying Tesla, which has a 75 multiple.
The better-than-expected earnings prompted a slew of price target and ratings increases from Wall Street analysts on Friday. Oppenheimer & Co. initiated coverage at outperform and setting a price target of $115, while JPMorgan Chase & Co. kept its overweight rating and raised its price target to $115 from $110.
Of the 22 analysts that cover the stock, 21 rate it either outperform or hold, with an average 12-month target price of more than $108.
For its part, the company is optimistic about its future.
“We don’t think this is just any COVID catchup,” Chief Executive Officer Michael Rapino said on the company’s earnings conference call Thursday. “We think that this is going to be the time where live on a global basis is going to have an incredible growth run for years to come.”
Trouble Ahead
Beyond the threat of a DOJ suit, there’s the possibility that the concert business is having a magical post-Covid moment this summer, when pent-up demand meets an ample supply of big name acts. Looking ahead, the obvious issue is with North American ticket prices averaging $120 this year, according to data from Pollstar, how many people will continue to shell out top dollar to catch a show next time around?
“I think the re-opening boom is over” said Huber Research Partners analyst Doug Arthur, the lone Live Nation analyst with an underweight rating on the stock. “Historically the concert business remains robust one year into a recession and then feels the impact with a delay.”
Arthur also pointed to Live Nation’s decision to not pay down its debt load this quarter. He’d expected the company to use its cash flow from 2022 to reduce its substantial credit exposure. But that never happened.
“They have a large interest expense number,” he said. “And I don’t ignore it.”