Any time a lawsuit from the Department of Justice is involved in an investment narrative, caution is warranted. Still, despite the antitrust allegations, Live Nation Entertainment (NYSE:LYV) appears compelling. Fundamentally, analysts covering the space believe that the lawsuit lacks enough substance. As well, Live Nation ties into robust demand for travel and experiential expenditures. Therefore, the contrarian argument makes sense, making me bullish on LYV stock.
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Breaking Down the Ebb and Flow of LYV Stock
Late last month, Bloomberg reported that the DOJ along with a group of states brought legal action against Live Nation. Primarily, the company promotes, operates and manages ticket sales for various live entertainment events globally. It also features a business unit that owns and operates entertainment venues. However, the major concern centers on Live Nation’s ownership of Ticketmaster.
As TipRanks reporter Radhika Saraogi stated, Live Nation merged with Ticketmaster. However, the deal was only approved “on the condition that Live Nation would refrain from discriminatory practices against concert venues that chose not to utilize Ticketmaster’s services.” However, investigations into the matter revealed that Live Nation may have repeatedly violated this agreement.
It didn’t really help that both brands “faced continued criticism over high service fees, inadequate customer service, and potentially anti-competitive practices,” per Saraogi. Of course, Ticketmaster faced the glare of the accusatory spotlight when it badly mangled pop superstar Taylor Swift’s “Eras Tour” ticket sales.
With Swift herself weighing in on the issue, LYV stock did not look particularly promising. Still, another side to the story exists.
Even with the antitrust lawsuit imposed against Live Nation, Guggenheim analyst Curry Baker continues to be bullish on LYV stock. The expert maintains a Buy rating on the equity along with a $128 price target. As TipRanks reporter Vince Condarcuri mentioned, Baker believes that the case against the entertainment specialist is weak.
Indeed, the analyst “expects Live Nation to strongly defend itself based on the belief that the DOJ lacks a substantive or winnable case based on precedent and facts,” wrote Condarcuri. And what are those facts?
It’s impossible to go over the entirety of the legal defense of Live Nation. However, one core fact is that the burden of proof that the company commands monopoly power lies with the DOJ. Second, asserting that monopoly power exists is problematic because of LYV’s underlying financials. On a trailing-12-month (TTM) basis, Live Nation’s net margin comes out to less than 3%. That’s hardly what one would term a monopoly power.
Demand for Experiences Could Boost Live Nation
To be fair, other concerns related to Live Nation have been forwarded that cloud the waters. For example, the company enjoys exclusivity deals with major venues. Not only that, but it has enforced those agreements to the detriment of fans. Such practices are common in the broader entertainment industry.
Still, the DOJ seeks a jury trial. Obviously, in such a framework, humans are involved – and humans, unlike machines, can be swayed by emotions. That does add uncertainty to Live Nation and LYV stock. Still, the core issue of whether the company enjoys monopoly power doesn’t appear convincing to some notable experts.
Currently, LYV stock is conspicuously off its highs posted in 2022. For daring investors, the relative discount could be an attractive one.
Mainly, that’s due to the fundamentals. Immediately following the loosening of COVID-19 restrictions, the phenomenon known as revenge travel flourished. Basically, people who have been forced to quarantine were eager to make up for lost time.
Presently, that acute sense of needing to travel has diminished. Nevertheless, the concept of travel prioritization has emerged to take its place. Despite the pressures of inflation and high borrowing costs, American consumers recognize the importance of experiential expenditures: it’s more important to make memories than buy stuff.
This dynamic may ultimately help boost LYV stock. As Taylor Swift demonstrated with her sold-out concerts, people will pay premium dollars, even against harsh economic headwinds. That bodes well for the live entertainment industry.
Business by the Numbers
Obviously, different sources have different projections. However, research firm Growth Market Reports notes that the global entertainment market size reached a valuation of $2.48 trillion in 2022. It’s expected to hit $5.64 trillion by 2031, expanding at a compound annual growth rate (CAGR) of 9.9%.
Regarding LYV stock, analysts project that in Fiscal 2024, Live Nation will post revenue of $24.87 billion, up 9.3% against the prior year. In Fiscal 2025, experts believe that the top line will rise to $27.16 billion. If so, that would be 9.2% up from projected 2024 sales. Therefore, Live Nation’s expected growth is roughly in line with the industry’s expected acceleration, which also clouds the DOJ’s narrative.
Again, if the company enjoyed monopoly power, one would expect far greater domination.
Still, LYV stock is attractively priced. Right now, shares trade at 0.92x trailing-year sales. The entertainment sector’s average sales multiple runs at 1.34x.
Is Live Nation Entertainment Stock a Buy, According to Analysts?
Turning to Wall Street, LYV stock has a Strong Buy consensus rating based on 15 Buys, one Hold, and zero Sell ratings. The average LYV stock price target is $119.38, implying 33.7% upside potential.
The Takeaway: Legal Fire Against LYV Stock Might Not Hold Water
There’s no question that the lawsuit against Live Nation Entertainment is distracting. Certainly, it adds ambiguity to the narrative. However, drilling into some of the core details, the claim that the company enjoys monopoly power seems inadequate. If the suit ends up favoring Live Nation, LYV stock could then eventually rise on the travel prioritization catalyst. All factors considered, LYV appears to be a reasonably good deal for the risk-tolerant speculator.
