April 28, 2021, 8:26 am
Not a lot of companies were hit harder by the pandemic than Live Nation. The country's top concert promoter saw its revenue plummet 84% in 2020. At first, the stock plummeted, from $72 per share to $33. But it quickly rebounded, and it's now trading at an almost all-time high at $83 per share.
But with the drop of customers in 2020, the company is burning cash. However, the market seems confident in Live Nation coming back. This begs the question - how realistic is the market's expectations about Live Nation's big come-back? Is Live Nation (LYV) the next growth stock? With Earnings being reported May 6, let's dig in.
Live Nation is one of the largest concert and ticketing companies globally, founded in 2010, following the merger of Live Nation and Ticketmaster. The merger has been heavily questioned since it gave the company a near-monopoly in the ticket distribution world. However, the company claims that they still have many competitors (AXS, Tickets.com, Eventbrite, etc.), which control some large venues and markets. With that being said, Live Nation is undoubtedly the most dominant player in this space, for now at least.
Live Nations' revenue crashed from $12B in January 2020 to just 1.8B in January 2021. At the same time, the Free Cash Flow went from 250M to -1.3B. The company is burning cash, but analysts expect the company to turn a profit in 2022.
The market cap is currently sitting at $17.9B, which is higher than 18 months ago when the company had a profit, so investors are definitely looking into potential growth.
Growth is expected since many signs indicate that America will "get back to normal" by the end of May. Vaccinations are rolling out faster than expected, and CDC just announced new guidelines on gatherings for vaccinated people. This has led people to start hoping and planning for concerts and other events in the not distant future.
Things, looking at Live Nation's web traffic, are finally starting to look promising. Web traffic to ticketmaster.com is up almost 90% since January, and web traffic to livenation.com is up approximately 50% during the same period. By monitoring Google Trends, we can also see that searches for Live Nation have more than doubled since February.
The same story can be told when talking about Live Nation's mobile apps. The app downloads are up from approximately 4000 per month to 27000 per month in the last three months.
What do you do on these Live Nation's websites and mobile apps? You buy tickets for events. So with that in demand, we should expect an increase in revenue in Q1.
Live Nation is getting ready. Even though they had to lay off 20%(!) of their workforce in 2020, they are finally starting to hire people again. Since the end of March 2021, the company has published more than 200 new job posts, up by 500%.
But tread cautiously.
There are still restrictions out there. A good example is New York, where arts and entertainment venues are allowed, but capacity is limited to no more than 33%, and even that is capped at 100 for an indoor performance space and 200 for an outdoor venue. This will probably change, but I don't expect 100% capacity anytime soon.
The current web traffic (even with the promising increase) is around the same amount of traffic that the company had back in September.
There's a lot of opportunities for Live Nation going forward. The obvious is that, as the most considerable concert and ticketing company globally, Live Nation should be a solid re-opening play if vaccine rollouts continue and fans can attend physical concerts later in 2021 and 2022. New York City just announced that they will re-open 100% on July 1, and that market is huge for Live Nation.
The company acquired Veeps, a platform for virtual concerts, back In January, a strong play in areas that are not 100% re-opened.
Another opportunity, and a strong trend for investors, is non-fungible tokens (NFTs). Live Nation is in a great position to further monetize its assets with NFT offerings. Concert tickets, posters, exclusive photos, etc., could be added to their offerings, potentially generating an additional revenue source.
My two cents. Live Nation has high growth potential with a lot of demand and opportunities to grow its business. Looking at the web traffic, app downloads, social media mentions, and sentiment, it's apparent that they will get a lot of their clients (and then some) back very soon. But Live Nation also has a worrying balance sheet. And you could make the argument that even though web traffic and downloads are increasing, it's not increasing fast enough. For a potential NFT play, you would also think that the company would hire more people with experience in fintech, or another digital industry. But there's no indicator of that from looking at their current 250 open job postings.
When I started to research this article, I was sure that Live Nation was the next growth stock and I was excited to invest. Now, with all the risk in mind, I'll pass on Live Nation and continue to look for the next growth stock.
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