Live Nation Entertainment upgraded at Citi on ‘more reasonable’ risk-reward
Live Nation Entertainment (LYV) upgraded at Citi on ‘more reasonable’ risk-reward
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By Sam Boughedda
Citi analyst upgraded Live Nation Entertainment (NYSE:LYV) from Neutral to Buy, lowering the firm’s price target on the stock from $90 to $82 in a research note Monday.
The analysts explained that the firm sees Live Nation’s risk-reward as more reasonable.
«If Live Nation remains a single firm, we believe the shares are worth $90 per share. If Live Nation is forced to split into two firms, we believe the shares are worth $48. We ascribe an 80% likelihood that the firm remains intact and a 20% likelihood that Live Nation is forced to unwind the 2010 merger,» wrote the analysts.
However, they outlined four potential headwinds for the company, which they believe the buy-side is worried about.
«Live Nation’s equity has come under pressure over the last year. We believe the buy side is worried about four things: 1) the achievability of Street estimates in 2023, 2) the higher cost of capital has put pressure on Live Nation’s multiple, 3) the fallout from the inability to meet the robust demand for Taylor Swift tickets, 4) the potential DoJ inquiry into the firm’s competitive practices,» the analysts explained.
On the potential DoJ inquiry, they said: «Press reports (The New York Times, 18 Nov 2022) suggest the DoJ has opened an inquiry into the firm’s competitive practices. The most bearish interpretation is that the DoJ may seek to unwind the 2010 merger between Live Nation (SFX) and Ticketmaster. If the DoJ seeks to unwind the merger – and is successful – we believe: a) standalone Live Nation would fetch 13.5x EV-EBITDA, b) standalone Ticketmaster would fetch 8.0x EV-EBITDA, and c) the firm would incur $100 million of dis-synergies. Taken together, this suggests a break-up of the firm would likely result in a $48 equity value. We assign a 20% likelihood to this scenario (and an 80% likelihood that the status quo endures).»
Live Nation shares have gained over 1% at the time of writing.
