When the loyal army of Taylor Swift fans erupt in outrage, impacted enterprises will struggle to remove the bad guy image. While that’s the circumstance that Live Nation Entertainment (NYSE:LYV) finds itself in, the truth presents a more complex narrative. Admittedly controversial, no clear alternative solution exists to Live Nation’s event ticketing services. Therefore, I am neutral on LYV stock, with a slight hint of optimism.
Fundamentally, Live Nation suffers from two major controversies. First, the way it distributes live event tickets for the first time to the public (primary market transactions) caused much uproar. Prior to Live Nation merging with Ticketmaster in 2010, the former agreed that it would abide by fair practice provisions. However, The New York Times reported that the Justice Department discovered that Live Nation repeatedly violated these agreements.
Second, the issue of ticket scalping, specifically using bots to buy large volumes of tickets at rapid speeds for later resale (second market transactions), sparked intense criticism. In fairness to the discussion surrounding LYV stock, scalping has been around for ages. Indeed, investigative journal Reveal noted that the earliest iterations of scalping occurred during the Enlightenment era.
Therefore, it’s not just Taylor Swift fans that are upset about the obstacles associated with primary and secondary markets. It’s been a longstanding issue, though “Swifties” certainly brought intense public attention to the problem.
Although an ugly matter that should be resolved, it’s not clear that Live Nation stands in the wrong. Indeed, even the scalpers themselves may not be the monsters the public deems them to be.
LYV Stock is Ugly, but Ugliness Isn’t a Crime
To be sure, the image of distraught fans – often young and impressionable – tugs at the heartstrings. Simultaneously, contempt and rage toward the “responsible” entities represent a natural moral trajectory. Thus, LYV stock undergirds an often-ugly business, no doubt about it. However, it’s not clear that Live Nation nor associated secondary market participants commit wrongdoing.
First, no easy solution exists regarding the scalping dilemma. For instance, former President Barack Obama signed the Better Online Ticket Sales Act of 2016. On paper, the legislation targeted the practice of using high-speed bots to effectively block out human fans from purchasing tickets. In reality, it’s 2023, and the matter still presents a curse for attendees of concerts and sporting events.
Second, attacking the underlying enterprise of LYV stock won’t solve the demand problem of in-demand events. Mathematically speaking, a human performer can only conduct so many shows per a given unit of time. Further, the venues in which they perform only hold so many seats. Under the principles of fair market capitalism, it only makes sense to give tickets to the highest bidders.
Yes, many, if not most, will be left out in the cold. It’s heartbreaking. It’s also life. Unfortunately, the government cannot deliver legislation that will eliminate heartbreak from this world.
Finally, the artists themselves need enterprises like Live Nation for cover to do their dirty work. Indeed, Live Nation – and secondary market vendors – conduct their baseline sales in the fairest manner possible: whoever wants the tickets the most will pay the most.
Again, that’s just a reality of life. It says nothing good or bad about LYV stock.
Financials on the Resurgence
As a quick snapshot of its financials, Live Nation could certainly use some work. For instance, its balance sheet presents middling stability. Notably, its Altman Z-Score (a solvency metric) pings at 1.52, indicating a distressed enterprise at risk of bankruptcy within the next two years. Operationally, the company features middling net margins. From the current angle, LYV stock appears to be a Sell.
However, its three-year revenue growth rate stands at 13%, better than most of the diversified media industry. After suffering a sharp blow from the COVID-19 crisis, Live Nation stands on a resurgent track. In Q4 2022, the company posted revenue of $4.29 billion, up nearly 59% against the year-ago quarter.
To be fair, its net loss widened to $252 million (compared to $210 million in Q4 2021). However, for FY2022, Live Nation posted a positive net income of $149 million. As people get over fears of COVID-19, LYV stock could move higher.
Yes, it’s controversial. No, practically no other viable solution exists.
Is LYV Stock a Buy, According to Analysts?
Turning to Wall Street, LYV stock has a Moderate Buy consensus rating based on two Buys, zero Holds, and zero Sell ratings. The average LYV stock price target is $97.50, implying 33.6% upside potential.
The Takeaway: LYV Stock is Here for the Long Run
In some ways, Live Nation represents the slaughterhouse of the broader entertainment industry. Seemingly everybody that isn’t a vegan/vegetarian desires a top sirloin steak. However, not everybody has the stomach to witness how these steaks came to be.
In fairness, any business that makes little girls cry is an ugly one. However, investors can’t lose sight of the necessity of this business (under the context of entertainment machinery). While LYV stock might not symbolize a sterling Buy, it’s not a Sell.
