Live Nation Shares Rock Out Ahead of Q2 Earnings

Key Points

• Live Nation's share price is within striking distance of an elusive $100 mark following a blowout Q1 report.
• Wall Street is expecting 12% sales growth and a fifth straight outperformance from the upcoming Q2 report.
• Live Nation is at a critical juncture in terms of establishing its brand image and reputation with customers.
• Analysts are projecting 120% EPS growth next year.

In May 2023, concert promoter Live Nation Entertainment, Inc. NYSE: LYV announced first-quarter financials that brought the house down. Its stock rally since suggests investors want an encore performance.

Roughly $30.00 has been added to Live Nation’s share price over the last few months, putting it within striking distance of an elusive $100 mark it twice came close to last summer. The move stems from a blowout Q1 report that showed consumers continue to brush aside inflation and spend on their favorite music artists and other live shows. More than 19 million fans attended some 19,509 events across 45 countries, driving 73% revenue growth in Q1. It was the company’s fourth straight consensus-topping performance. 

Live Nation investors will be looking for further evidence of pent-up live entertainment demand in the July 27th second quarter update. Despite facing another difficult comparison to a strong recovery in the prior year period, Wall Street is expecting 12% sales growth. The market appears to be expecting a fifth straight outperformance — and for good reason. 

What Has Live Nation Done Since Q1?

On July 12th, Live Nation announced that it is acquiring iconic Toronto music venue The Opera House. The historical 114-year-old landmark has played host to artists like Metallica, Nirvana and Eminem, to name a few. While the new asset won’t show up in the Q2 results, it exemplifies the company’s aggressive approach to strengthening its position as the world’s top live entertainment provider.

Just two days prior, Live Nation scooped up a majority stake in Colombian music promoter Paramo Presenta to expand its venue portfolio in Latin America.  

To further connect with its music-loving audience, Live Nation just launched a music meditation app called Mindful Nation. The new digital channel is cleverly seeking to tap into a growing global focus on mental health issues. While the mellow beats and melodic trainer-led classes may not translate directly to ticket sales, it could help forge a better connection with the all-important younger generations.

Live Nation is at a critical juncture in terms of establishing its brand image and reputation with customers. The company’s Ticketmaster arm has faced intense backlash over exorbitant ticket prices and a lack of transparency. Last week, concertgoers in France were frustrated by another headache involving a Taylor Swift ticketing issue with a third-party website.

In an effort to appease not only customers but also the White House, Live Nation has rolled out ‘all-in pricing’ that lets fans see the full ticket price (including fees) up front. The move, while mainly a response to government pressure, could make for a user-friendly ticket-buying experience. Then again, with ticket sales up 20% year-over-year as of May 2023, the issue hasn’t slowed ticket sales much — and may ultimately amount to little gain.

Will Live Nation Stock Finally Reach $100?

Live Nation has faced plenty of negative press this year, but its stock continues to move nicely off its March 2023 low. With the Ticketmaster complaints likely far from over, an important thing for investors to know is that ticketing accounts for less than 15% of total revenue. Concert promotion, music venue operations, music festival production and artist services represent around 80% of the business. Given the lasting pent-up demand for live events worldwide (and, yes, higher ticket prices), this is why Live Nation is on pace to grow sales from a stellar 2022.

But what about profitability? Like other entertainment and media companies, Live Nation is wrestling with higher labor and other operational costs. Non-owned venue costs and artist activation costs are also on the rise. Based on analysts’ forecasts, this is expected to lead to no or slightly negative earnings growth this year.

The good news is that many of these cost pressures could subside in 2024. Along with healthy demand trends, this has Wall Street projecting 120% earning per share (EPS) growth next year. 

Unfortunately, with Live Nation up 40% since its Q1 report, a brighter profit outlook may already be built into the share price. Trading in the mid-$90s, Live Nation’s stock has surpassed most analyst targets and the average target implies no upside. With another crowd-pleasing report, however, Live Nation could easily crowd-surf its way past $100 next week.