Live Nation Entertainment: A DCF-Driven Bear Case

Excerpt

The following is a 250-word excerpt from my full article on Seeking Alpha: A crowdsourced financial market content service where investors can share ideas, discuss news, and make informed investment decisions. To view the full article without a paywall, please click on the link below:
https://seekingalpha.com/article/4774728?gt=83287af33219ea82

Summary

• I give Live Nation Entertainment a sell rating.

• The company's cash flow indicates an intrinsic value of $93.51 per share, meaning its stock is currently trading at almost 48% above its intrinsic value.

• Q1 results were mixed, with revenue down 11.1% YoY that, in turn, brought a 15% YoY decrease in the ticketing segment of operating income.

• The company also has the potential to have its operating margins curtailed or even to lose its vertical integration, given its current legal challenges from the DOJ and FTC.

Background

I wrote on article on Live Nation Entertainment (NYSE:LYV) back in December, where I explained in detail how the company makes their money. In sum, Live Nation's major source of profit lies in its sponsorships. Though the company only generated 4.81% of its revenue in 2023 from sponsorships, this percentage amounted to 41% of the company's operating income and an operating margin of 54.1%. These sponsorships allow businesses to reach customers at their live events and on the company's website.

Live Nation's other major source of profit comes from ticketing that, though only having generated 13.01% of the company's revenue, resulted in an operating margin of 30.7% in 2023. The company's concerts, on the other hand—going as far back as the 10-Ks from 2008—have always reported an operating loss, though they are responsible for generating more than 80% of the company's revenue…