Live Nation stock reaches 52-week high due to Taylor Swift-boosted earnings, then drops 16% after DOJ probe report.
Live Nation stock reaches 52-week high due to Taylor Swift-boosted earnings, then drops 16% after DOJ probe report.
Live Nation Faces Potential Antitrust Suit as Stock Plunges
Live Nation, the ticket-selling and concert-promoting giant, may face an uphill battle as reports of a potential antitrust suit filed by the Department of Justice (DOJ) against the company and its subsidiary Ticketmaster surfaced. This news sent Live Nation’s stock plummeting by as much as 16%. The company’s aggressive pricing strategies have also drawn attention from the White House and Congress.
While Live Nation has made efforts to increase transparency and improve consumer experiences, the DOJ could take a hard line and potentially unwind the company’s 2010 merger with Ticketmaster. Bloomberg Intelligence analyst Jennifer Rie speculates that the DOJ’s scrutiny might be a result of the initial consent decree’s extension in 2019.
Despite the stock’s initial rally following Live Nation’s impressive second-quarter earnings report, which exceeded expectations, it eventually ended the session down by 7.8%. The company’s stock is currently valued at 76 times trailing earnings, making it even pricier than the high-flying Tesla, which has a multiple of 75.
However, this setback didn’t stop Wall Street analysts from increasing their price targets and ratings for Live Nation. Oppenheimer & Co. initiated coverage at outperform with a price target of $115, while JPMorgan Chase & Co. maintained its overweight rating and raised its price target to $115 from $110. Out of the 22 analysts covering the stock, 21 have either labeled it as outperform or hold, giving it an average target price of over $108.
In spite of the potential legal troubles, Live Nation remains hopeful for the future. CEO Michael Rapino expressed optimism about the company’s growth prospects, stating, “We don’t think this is just any COVID catchup. We think that this is going to be the time where live on a global basis is going to have an incredible growth run for years to come.”
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Trouble Ahead for Live Nation
Apart from the looming threat of a DOJ suit, there is another concern for the concert business in general. While this summer may be experiencing a magical post-Covid moment with an abundance of big name acts and pent-up demand, there are doubts as to whether people will continue to shell out top dollar for tickets in the future. Pollstar data reveals that North American ticket prices have averaged $120 this year, raising the question of how sustainable this pricing strategy is.
Doug Arthur, an analyst at Huber Research Partners and the only Live Nation analyst with an underweight rating on the stock, expressed his skepticism. He believes that historically the concert business remains robust for about a year into a recession, only to feel the impact later on. Additionally, Arthur highlights Live Nation’s decision not to pay down its debt load in this quarter, despite expectations that the company would reduce its substantial credit exposure using its 2022 cash flow.
“They have a large interest expense number, and I don’t ignore it,” Arthur pointed out.
With potential legal challenges on the horizon and the uncertainty surrounding ticket prices, Live Nation faces a challenging road ahead. However, the company remains hopeful that the booming concert industry will continue to thrive even after the pandemic, with CEO Michael Rapino eagerly anticipating an “incredible growth run for years to come.”
This article originally appeared on Fortune.
