Live Nation Entertainment (NYSE:LYV) is the world’s largest promoter of live events, it operates over 270 venues from theatres to arenas). It also has the Ticketmaster platform.
They also own 4/5 of the largest music festivals in North America.
Back in 2016 live nation has over 71 million people grab a ticket to one of their shows.
Of course the global pandemic & social distancing issues have affected almost every business in a negative way.
However, the situation is particularly bleak for live events in massive arenas.
With major festivals such as Tomorrowland being cancelled already for the year 2020, it’s hard to imagine, that people will be encouraged to refill these major arena’s so soon after these strict social distancing measures have been in place.
So with Live Nations stock at rock bottom & the future of concerts & major events remaining uncertain!
Would it be crazy to invest into Live Nation?
Billionaire Mark Cuban doesn’t think so & publicly voiced his purchase of shares in the business.
(VID 1 Mark Cuban Live nation purchase) 11:30 mins in.
Could this stock double in the next few years? Or is it just too risky to invest in?
In this video we’re going to find out, I’m going to do a full analysis of the stock & assess the wider impact that this pandemic may have of large social gatherings in the future!
LETS DIVE IN!
Will Things get back to normal?
The mass social distancing laws have had a major economic impact & although I don’t believe this is a permanent situation. How fast a recovery will be is uncertain.
Many economists have spoken of a possible “traffic light” system in which low risk businesses & activities are presumed. Such as restaurant access with less than 10 people etc.
Given these theories the Live events & festival industry will have one the toughest times to recover.
These means it’s also one of the most risky places to invest!
Now despite Billionaire mark Cuban investing into Live Nation during this global pandemic, he has actually voiced many concerns about how & if things will get back to normal.
So it seems Mark Cuban is contradicting himself or perhaps back tracking on his initial investments.
As he has investing money into shares yet is voicing major concerns about gatherings of people.
As the owner of the Dallas Mavericks basketball team he has predicted games initially just in front of the camera & essential people.
Could this stock double in Price?
So could this stock double in price!
Live Nation was once a stock market hero, previously it had climbed from a price of just $10 per share at the start of 2013 to over $70 per share at the start of 2020.
Driven by the growth of the concert attendance industry & the consumer trend in which people prefer to spend money on experiences over physical possessions.
Concerts & live events are the perfect place for a memory social gathering.
Live events & touring also affects musicians earnings massively, recording artists making the vast majority of their money from live music concerts. According to research from the Music Industry.
As they don’t make as much from the digital streaming platforms such as spotify.
This trend has led to an increase in the number of concerts which has further bolstered Live Nation’s revenue growth.
Although it’s difficult to put a clear date on when live events industry will resume, the consumer demand is still strong & thus many analysts have predicted this industry to return at some point.
The real question is WHEN? 1 year, 2 year, 5 years. And
What will that look like? Social distance seating? Rigorous cleaning schedules? Temperature checks upon entry?
Does Live Nation have high DEBT?
Before investing into any business during a recession period you must know the levels of debt the business has & if it has sufficient cash flow to cover it’s liabilities. In other words check the BALANCE SHEET!
In 2019 Live Nation had $3.3 billion in debt outstanding and $2.5 billion in cash.
This compares to $773 million in EBITDA (earnings before interest, taxes, depreciation, and amortization) generated during 2019.
You must consider how much earnings the company has which can go toward paying interest and debt retirement costs.
It may appear that Live Nation has a enough amount of cash on hand and earnings to accommodate its debt load.
However, as earnings in 2020 will likely be hampered or potentially non-existent this puts the business in a risky situation.
In addition, the cash held by live nation isn’t cash the company can keep –
For example,
$837 million of it is related to tickets sold for events that have not yet occurred and charges owed to clients.
There is a strong possibility that many of those events may be cancelled, which means that the cash would have to be refunded to customers.
The good news is Live Nation doesn’t have any major debt maturities in 2020 & most likely has enough cash on hand to whether this storm!
DEEP DIVING IN THE STOCK (Stock analysis)
https://simplywall.st/stocks/gb/media/lse-0jvd/live-nation-entertainment-shares
Cash Flow Seasonality?
This global pandemic could not have come at a worse time for Live Nation. The spring, summer, and early autumn months are Live Nation’s most popular seasons.
The business actually operates at a loss during the first and fourth quarters, & then makes up for these losses with strong profits during the second and third quarters.
With the 2nd & 3rd Quarters uncertain, this makes this stock very risky.
https://www.fool.com/investing/2020/04/02/should-you-buy-live-nation-stock-right-now.aspx
FINAL THOUGHTS:
Overall,
Live Nation is a great company to own during normal times, before the Pandemic it’s earnings were forecast to grow at 58% per year!
However, due to this recent epidemic how long this business takes to recover is still uncertain. Although It’s share price is 29% below it’s fair value which does offer a margin of safety.
For me this is still a business to keep your eye on, an investment now could pay off big time but I personally will hold out on this one for now & keep up to date with managements outlook for it’s business during the 2nd & 3rd quarters.
Do you think the live events industry will recover?
Comment your thoughts on our youtube channel!
