By Paul R. La Monica
Good luck finding many sports or music enthusiasts who like Live Nation Entertainment -- the concert promoter and venue owner that is also the parent company of Ticketmaster.
The list of consumer grievances is long: the litany of fees, complaints about ticket resale prices on the platform, and the glitches that have made it difficult (if not impossible) to purchase seats for in-demand events on the day they go on sale. In short, Live Nation is an easy target for criticism. But don't tell that to Wall Street.
Investors love Live Nation about as much as fans of Taylor Swift and Oasis loathe it. Shares are up nearly 50% this year and they hit a fresh record high Thursday. That's despite the Justice Department's May lawsuit seeking to break up Live Nation -- essentially calling for the 2010 acquisition of Ticketmaster to be undone.
Will Live Nation be forced to sell Ticketmaster though? The company may have been a target of President Joe Biden's Justice Department. However, as President-elect Donald Trump is expected to appoint new regulators that might have a friendlier view toward mergers, it is no longer clear if Live Nation faces as many antitrust risks.
Wall Street is clearly betting that will be the case. Analysts at Citi boosted their price target on Live Nation stock to $163 from $130 on Wednesday, saying in a report that "we now believe that the Justice Department is likely to drop its case against Live Nation."
Shares of Live Nation have surged 17% since Election Day. The company's stronger-than-expected earnings report on Nov. 11 obviously helped, too. Live Nation CEO Michael Rapino told analysts on its most recent earnings conference call that he expects more growth in adjusted operating income and sponsorship revenue as the company continues to promote more shows in Latin America, India, the Middle East, Asia and Australia.
Another potential catalyst? Liberty Media, the John Malone-run conglomerate, is looking to unlock the value in its nearly 30% stake in Live Nation as part of a broader restructuring.
Liberty Media announced earlier this month that it plans to turn its Liberty Live tracking stock into a separately traded public company that would hold its nearly 70 million shares stake in Live Nation. Barron's recently wrote that this could pave the way for Liberty Live to be bought outright by Live Nation. It would be similar to the recently announced deal by cable company Charter Communications to buy Malone's Liberty Broadband unit.
A transaction could happen within the next few years, according to Chris Marangi, co-chief investment officer of value at Gabelli Funds. Liberty Media is a major holding of the Gabelli Media Mogul fund. Marangi said in an email to Barron's that a Liberty Live/Live Nation merger "has always been the endgame."
All this may be true. But there are risks for any investors chasing Live Nation stock now. It's not entirely certain that the Trump administration will be willing to drop the DOJ's case against the company.
What's more, Vice President-elect J.D. Vance has also had favorable things to say about current Federal Trade Commission chair Lina Khan, who has led the effort to crack down on techs during the Biden administration. Khan is unlikely to keep her job in the Trump administration, but Trump and Vance might look to replace her at the FTC with someone who is equally tough from an antitrust perspective.
If Live Nation is forced to get rid of Ticketmaster, it might not be a disaster for the company though.
"Though growth would potentially be slightly impeded, we believe it would still be solid for both entities, if separated, given robust fundamentals and numerous tailwinds," said BofA Securities analyst Peter Henderson said in a September report, after initiating coverage on Live Nation.
But Live Nation stock isn't cheap either, trading at nearly 55 times 2025 earnings estimates and 21 times expected operating income for next year. That's a steep premium to the valuation for competitor Madison Square Garden Entertainment, the owner of the MSG arena in New York City, Radio City Music Hall, and The Chicago Theatre in the Windy City. The high price also seems to imply that the market sees smooth sailing ahead for Live Nation.
So anyone chasing Live Nation at these levels on the hopes that Trump will leave the company alone may need to be a little more cautious.
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
November 21, 2024 14:49 ET (19:49 GMT)
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