About Live Nation
In addition to loving Houston, I have yet another affinity for the beautiful, welcoming state that is Colorado.
Last Christmas season, I took a road trip to Denver, also traveling through some of the swankier spots of the state just west of Nuggets Nation, and the trip consisted of snowmobiling, perusing through fancy mountain towns and stores within, watching the Denver Nuggets put an absolute beatdown on the Memphis Grizzlies, tons of hiking, stargazing and staring at mountains as far as the eye can see, soaking up every single last drop of beauty that Colorado had (and still has for that matter) to offer.
Oh yeah, and I became an art junkie.
Now, while I am most definitely running the risk of sounding incredibly superficial, high-brow and borderline pretentious, it all started with a ride out to a small mountain village shopping complex (this was way fancier than a mall, believe me), where I was instantly greeted by beautiful, glistening Christmas lights, sweets, treats and other tasty eats, and while I was walking around, I noticed a store that was seemingly open for business but plenty empty, and I, like anyone would’ve obviously done, strolled right in and bam, was greeted by a pretty gallery assistant and something(s) that caught my eye even more so were intricate paintings, sculptures and other pieces of fine art.
I am not fancy quite yet, but I am certainly working on it, and with that, I was thoroughly bitten by the art bug and subsequently made it a point to go ahead and visit a few of the other art galleries and museums in and around Denver, where I was lodging (because the word “staying” just isn’t fancy enough in this context) at the time.
I had the pleasure of visiting the Denver Art Museum and the various exhibits within, however, my favorite spot by far was a museum-style display owned and containing the paintings and pieces collected by one of the wealthiest inhabitants of Colorado, Philip Anschutz, well known for being a business magnate with his hands in many different cookie jars, but he is arguably best known for his ownership stakes in a professional hockey franchise by the name of the Los Angeles Kings along with his rather expansive stakes in entertainment venues across the United States, among the most famous being the Crypto.com Arena in Los Angeles (formerly known as the Staples Center), which hosts the Los Angeles Lakers, its neighborhood rivals, the Los Angeles Clippers, the professional basketball women’s franchise by the name of the Los Angeles Sparks as well as who else but the Kings themselves, Anschutz also owning stakes in The O2 in London and the billionaire also happens to own a few resorts across the United States along with one of his most prized and relevant possessions, the Coachella Valley Music and Arts Festival, better known simply as Coachella in popular culture, which is one of the world’s largest scaled and sought after concert venues, and has been for some time.
This seems to be a rather decent transition into Live Nation itself, as Live Nation is one of Anschutz’s parent company’s (known as Anschutz Entertainment Group, or AEG) fiercest and most unrelenting competitors, both companies being in the business of all things concert and entertainment, more broadly.
Headquartered in where else but Beverly Hills, California, Live Nation does anything and practically everything from putting concerts together, scouting different venues, ensuring quality production at said venues, selling tickets (which makes sense given that it is the current owner of one of the world’s largest ticket marketplaces, Ticketmaster), maintaining stakes in venues across the globe along with partnerships and sponsorships with third parties and even has dipped its toes into the agency industry, offering certain artist management services, also supplementally selling general merchandise online and within the concert venues it controls and operates.
From famed and frequently attended concerts and music festivals such as Chicago-based Lollapalooza, Austin City Limits (ACL) as well as other more local entertainment venues, Live Nation has a wide and deep entertainment portfolio, and while I generally deem the company to maintain a long-term tailwind with respect to the younger, rising (in age) generations that are in absolute lockstep with the experience-based economy, and with that, are typically willing to miss a few credit card payments if it means going to see Bad Bunny in person, there’s a need for a brief reality check.
What’s the sweet without some bitter reality, as it would be negligent if I failed to point out some of the sensitivities and vulnerabilities regarding Live Nation and as it relates to COVID, as this is something one must consider before even pondering touching this company and its stock, in my humble opinion.
As we all know, during the onset and largely throughout the duration of what has so far been the worst of COVID, concerts were among the first entertainment venues to instantly shut down and subsequently I imagine hemorrhage cash hand over fist, as let’s be honest, the comparable market size for those who want to pay money to attend a concert online is just puny, respectfully speaking.
You already knew this, but what’s wrong with a little solemn reminder?
At the end of the day, that’s just a consideration and the rest is just Live Nation.
Live Nation’s stock financials
With a present share price of $91.09 and a market capitalization of $21 billion, no regularly issued annual dividend offered to its shareholders and to top this initial information off, a price-to-earnings (P/E) ratio of a whopping 90.66, let’s just say I am not jumping for joy in relation to Live Nation’s shares (NYSE: LYV), as a tiny ownership stake in this company’s stock just straight up appears to be wildly expensive, particularly as it relates to its price-to-earnings ratio and how it is just about 70 points above the widely ascribed to fair value benchmark of 20, where it is said that any figure greater than this benchmark directly indicates that a stock’s price is overvalued, or trading ahead of its actual value.
Well ahead in this scenario.
While I refuse to let this dictate the rest of my feelings towards the company throughout the rest of this stock analysis article, context in the realm of investing for me is sort of like a dog in the investment world; one’s best friend.
Speaking of context, I am hardly shocked that this company doesn’t offer its shareholders a regular dividend at the moment, as even though this is an established firm within the entertainment sector, I candidly do not presume the industry is conducive towards being a gushing cash flow water fountain, as there are a plethora of expenses a company such as this one has to both eat and manage, and in order to enhance the guest experience, a lot of money has to be spent and one’s margin is most certainly going to be eaten alive.
Moving right along to the overall shape of the company’s balance sheet, Live Nation’s experienced executive team is in charge of just north of $19 billion in terms of total assets along with also just north of $19 billion in terms of total liabilities, which is, interestingly enough, the first mirror-style balance sheet I’ve ever seen or formally analyzed, but even more than that, it is essentially the general balance sheet breakdown I expected, or at the bare minimum I had my fair share of suspicions that Live Nation’s balance sheet would’ve contained its fair share of liabilities given my previous expense-related comments.
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Not to seem like a copout, however, on the basis of the balance sheet alone, I am neither encouraged nor thoroughly put off, as I think I need to learn more about the company’s cash flows, among other facts and figures, so I can gain a more informed frame of reference instead of basing too much off of this tiny, maybe good maybe not-so-good balance sheet picture.
In doing this, let’s first voyage towards the company’s income statement, where it can be found that Live Nation’s annual sales were essentially what one would have expected in most recent years, however, I will say that the company’s revenues immediately following the public onset of COVID-19 dropped to a rather frighteningly low amount, specifically dribbling down from a 2019 revenue figure of $11.5 billion to a following 2020 figure of $1.8 billion, getting chopped down like there was no tomorrow, which, sure, makes sense given the state of the world at the time, but I expected this company to at least have a little more of a revenue buffer through its other, non-core revenue streams, and with that, it is my sincere hope that the firm is investing more time and resources into the sale of merchandise, the promotion and successful hosting of online events and other more COVID-proof revenue generators, like partnerships and sponsorships.
Yes, the company’s revenues have since roared back to a strong relative high of $22.7 billion (2023), most of the sales being from Taylor Swift concerts (I’m kidding, but still), which is most definitely in line with the recent concert craze along with the exorbitant prices Live Nation and its subsidiaries charge, but I still maintain my general concerns and reluctances given just how elevated its liabilities are combined with its more than proven COVID-related vulnerabilities.
Also, while I do view the experience based economy as being a general long-term tailwind for the entertainment industry (among others), when the economy really sours and people are hardly able to pay for basic necessities such as food and rent, they are surely going to de-prioritize shelling out hundreds (if not thousands) of dollars for a thirty-minute set from their favorite artist, which obviously doesn’t bode well for Live Nation and its counterparts, making it far from recession resistant.
Onto the company’s cash flow statement, Live Nation’s total cash from operations figures have frankly been a bit better than I expected them to be, as the company, on average, has turned out (still referencing between and during 2019 and 2023) cash in the order of the mid-to-high $1 billion area code, of course, having a very rough year during 2020, reporting a loss of just over $1 billion, which given the state of affairs was to be expected.
While its figures (excluding 2020) are still relatively low in comparison to its previously shown revenues, this is still a decent deal of cash, but even more so, I like the consistency in this realm, as it doesn’t seem to be a major challenge for Live Nation to eek out some cash every (normal, non-COVID) year.
Live Nation’s stock fundamentals
Regarding the company’s specific net profit margin, Live Nation’s, according to Charles Schwab’s platform, is perched at a low (yet again, to be expected) 2.81%, which, when contextualizing it against the backdrop of some of its direct competitors, isn’t all that bad.
Take TKO Group Holdings as an example.
TKO is a similar media entity but instead of music and general entertainment, it focuses predominantly on hosting and distributing events related to wrestling and boxing, and it just so happens to have a relatively low net profit margin itself, pegged at -5.50%.
My point here is that the large scale event space is filled with costs aplenty and the events that Live Nation hosts are fun to attend for a reason, and I don’t think it can be solely attributed to the mere mystique of seeing Taylor Swift live in action, but more so the effects, lasers and other expensive novelties that you see at all of these concerts that are really just a vast slew of expenses for a company such as this one, thus the naturally muted net profit margin.
Should you buy Live Nation stock?
Admittedly, Live Nation is one of those companies that just sounds cool to invest in, as you could view yourself as being a part owner of the famed concert and general entertainment venues across the world that host the world’s superstars.
However, coolness is never a factor in my investment framework, and it frankly shouldn’t be part of yours either.
On a purely objective financial and economic basis, Live Nation is a leader in a tough category with a just as asset-to-liability heavy balance sheet, revenues that have technically been growing only within the last couple of years, consistent (but expectedly low) cash from its operations and with that, the same goes for its present net profit margin.
Given the positives and the negatives, plus the fact that one would be wise to incorporate the company’s distinct vulnerabilities to COVID-related matters and its present price-to-earnings ratio, which I deem to be the best barometer for its present valuation, Live Nation’s stock (NYSE: LYV) is indeed quite expensive relative to its actual worth and therefore, I think it makes the most sense to lend the company’s stock a “sell” rating until its price comes back to not attractive, but sheer reasonable levels.
DISCLAIMER: This analysis of the aforementioned stock security is in no way to be construed, understood, or seen as formal, professional, or any other form of investment advice. We are simply expressing our opinions regarding a publicly traded entity.
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