Last week ended beautifully for live entertainment company Live Nation (LYV). A fantastic earnings report sent the company on a wonderfully upward cant. Then came the tragic events of a Travis Scott concert at Astroworld over the weekend, and now the company is in retreat.
I’m bearish on Live Nation as a result, because this is exactly what the entire entertainment industry did not need. (See Analysts’ Top Stocks on TipRanks)
Looking at Live Nation’s year-to-date stock chart shows a company that was making fairly steady, albeit rather slow, upward progress. There was a nice upward tick that started in late January and continued through February. Then, the company reached a plateau that kept the share price within about the same $15 range for the next several months.
In late September, though, the company caught its second wind. It started climbing once more, and even saw one substantial upward spike last week before the latest downward trend started kicking in. (See Live Nation stock charts on TipRanks)
The latest news, however, is what proved to be a big disaster for Live Nation. During the Travis Scott Astroworld Festival in Houston over the weekend, a crowd surge left eight people dead and injuries ranged in the hundreds. Live Nation served as the event’s promoter, which hit the company hard over the weekend.
A Swift Kick in the Potential
Just a few days ago, there was a very different picture being painted for Live Nation. The company had just released its third-quarter earnings report, and things were looking great. The company reported a profit for the third quarter and stated that revenue was higher than what Wall Street’s projections were calling for.
There was even more spending than expected on T-shirts and hot dogs. For a minute, it looked like live entertainment might be fully coming back, a development that seemed impossible a year and a half ago.
Then came the tragedy that was Astroworld. Live Nation takes it on the chin as the event’s promoter. If that wasn’t already bad enough, it was also directly named as a defendant in some of the lawsuits. That’s exactly the kind of thing that the whole sector didn’t need.
Live entertainment was only just starting to come back. Now, we find a live show that had a body count and multiple lawsuits. That’s likely going to make everyone think twice about live entertainment.
It was becoming clear that the concept of COVID-19 wasn’t slowing people down. Live Nation’s third-quarter results made that clear. However, now we’re going to see people be increasingly gunshy about going back to live entertainment. No one will appreciate the potential of being trampled at their favorite events.
There is a possible way around this, though. Several reasonable-sounding suggestions have been offered to potentially ameliorate the issues before the next show.
Live Nation had worked with city and county officials to set up the site and security plans. Naturally, these plans will be scrutinized extensively in the weeks to come. Considering the fatalities from this event, it’s likely not going to help much in the short term.
Wall Street’s Take
Turning to Wall Street, Live Nation has a Moderate Buy consensus rating, based on five Buys and three Holds assigned in the past three months. The average Live Nation price target of $111.57 implies 4.1% downside potential.
Analyst price targets range from a low of $95 per share to a high of $126 per share.
Concluding Views
Plain and simple, ignore what you’ve seen recently for Live Nation. Things were great last week. However, that was last week. It’s going to be a bad idea to get in for the short term. There are lawsuits that will need to be resolved. Several plans will have to be reconsidered. The past results for Live Nation were looking good, so don’t count this company out altogether.
Let the dust settle on this latest tragedy before investing. There’s still something to like here. For the short term, however, investors are likely going to have to be bearish.
Disclosure: At the time of publication, Steve Anderson did not have a position in any of the securities mentioned in this article.
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