gilaxia
Thesis
Live Nation Entertainment (NYSE:LYV) presents buyers an opportunity to buy stock in a company that is extremely levered towards U.S. consumers. The firm has posted glorious financial results, and has exceeded many metrics compared to the pre-pandemic occasions. Live Nation is a good company that can proceed to expand its business as lengthy as customers remain sturdy and continue to spend. Even within the occasion of a cyclical downturn, Live Nation is financially wholesome sufficient to resist any macroeconomic shocks.
Company Overview
Live Nation is the leading operator of ticket sales for live leisure in the United States and overseas. Live Nation operates quite a few businesses, such because the operation of reside music events through Live Nation, the possession and management of venues, in addition to the sale of tickets to reside events by way of Ticket Master. Therefore, Live Nation has its toes in all areas of entertainment, and all elements of the leisure food chain. In phrases of its inventory price, Live Nation has underperformed the S&P 500, declining ~20% YTD compared to the market’s decline of ~10%. The firm’s stock price has seen some consolidation within the current months.
LYV Year to Date Total Returns (Daily) data by YCharts
Bounce Back Year
Live Nation has continued to be an excellent comeback story after the depths of the pandemic when reside events have been largely shuttered all over the world. In Live Nation’s latest earnings report in early August, Live Nation has reported that in comparability with the same Q2 in 2019, the corporate noticed 86% improve in Operating Income to $319 million and that live performance bookings were up 30% for all venue types comparing the same timeframe. The firm’s outperformance compared to a pre-pandemic period shows the company’s monetary health and resiliency, and reveals that the market for live leisure is stronger than ever and that its long-term prospects look brilliant. Live Nation also reports that the artist pipeline for 2023 is the biggest ever, which ought to lend some confidence to investors who might worry that 2021 and 2022 outperformance are associated to pent-up demand from the pandemic.
Sponsorship and Innovation
The live entertainment business has seen the integration of various monetization methods and know-how that has increased the income potential of the business. For instance, in the course of the pandemic, Korean entertainment firms developed and created occasions surrounding VR live performance experiences. Live Nation has additionally invested in technological improvements, particularly with regards to its ticketing enterprise via Ticketmaster. Earlier this yr, Live Nation started to make strategic partnerships with huge manufacturers such because the NFL, to permit customers to buy digital tickets and provide options round it, similar to making a re-sale ticket marketplace and and so forth. The company has additionally forayed into the NFT market which is an efficient instance of the company administration’s willingness to proceed to innovate and make positive that its business choices are maintaining with developments within the trendy times. In addition, Live Nation has seen substantial growth from the expansion of its sponsorship programs, which basically present a possibility for big companies to market towards audiences via experiential advertisements. The company reviews that 74% of its revenue progress has come from sponsorships, which exhibits the different monetization potential of stay occasions.
NFL / Ticketmaster Partnership
Return to Value
As seen in the chart beneath, Live Nation has seen a huge decline in income and earnings during the pandemic, and the corporate has come again with stronger results than the pre-pandemic highs on each fronts. The return to profitability and income ought to provide a clear indication that Live Nation has endured the worst attainable scenario for a stay entertainment business, and that the prospects are much brighter for the company on the heels of technology-driven growth in the industry. From 2015 to 2019, Live Nation has seen its prime line develop by 9.75% a year on common, and we consider that Live Nation will be in a position to replicate this development for the following 5 years based on continued innovation by the company and new monetization opportunities through partnerships and sponsorships. By 2025, we imagine that the corporate may be pretty valued at $167.28 per share at a ~25x P/E which we consider is an inexpensive a number of for an organization that will nonetheless be rising and growing revenue margins over time. That’s roughly an 83% capital appreciation potential from present ranges.
LYV Net Income (TTM) data by YCharts
Sweet Minute Capital Valuation Model
Conclusion
Live Nation Entertainment is a superb firm that has remained resilient during the pandemic and at present provides progress at a reasonable price to investors. We consider that the corporate’s outperformance compared to the pre-pandemic occasions demonstrates that the company is again heading in the proper direction, and we consider the inventory has potential for main price appreciation as the corporate continues to grow its profits and improve margins. We also like seeing the varied partnerships that Live Nation has been capable of make, in addition to seeing growth in several monetization areas, such as sponsorships. We believe that these strikes will reward shareholders within the long-run, and provides us a great purpose to imagine that the administration will exceed our personal expectations.