Event promoting firm Live Nation Entertainment (NYSE:LYV) has been been on a tear over the past three months as investors rushed to buy it amid optimism regarding the company’s most recent results. LYV stock has made its way 25% higher in just three months and analysts see more good news on the firm’s horizon.
So does that mean it’s time to buy LYV?
Live Nation is in the business of connecting fans with their favorite events. The company owns, operates or has an equity interest in many of the most popular venues in the world including the House of Blues, the Hollywood Palladium and the O2 in Dublin. LYV also operates Ticketmaster, an online ticket sales and marketing platform that offers tickets to a wide variety of live events across the world.
What sets LYV apart is the fact that it’s massive size means it doesn’t have many competitors with the same all-encompassing set-up. Live Nation’s business includes things like venue management, ticket sales and marketing, and artist management. The majority of LYV’s competitors are competing with the firm on just one plane — for example Tickets.com competes with Ticketmaster, but not in any of LYV’s other segments. This is beneficial for LYV because it gives the company widely diversified business and allows the firm to consolidate costs since many of its arms are linked.
LYV looks set to have another rosy quarter in the three months from April to June as discretionary consumer spending has been on the rise and concert attendance increasing. Millennials appear to be more interested in spending on experiences rather than tangible items, which has been a boon for entertainment firms like LYV– especially as festivals and live concerts gain popularity.
At the end of June, Live Nation acquired Red Mountain Entertainment, a concert and festival promoter that focuses primarily on the Southeastern United states. The deal will expand LVY’s reach even further and help Red Mountain grow its consulting business as its bookings get larger due to Live Nation’s deep pockets and plentiful connections.
Live Nation has also been working to improve its presence in the sports arena as well– the company recently signed on as a partner in Elevate Sports, a sports consultancy with clients in every major U.S. sports league. As Elevate is only a few months old, the partnership is unlikely to bear any substantial fruit for Live Nation anytime soon, but it should make LYV stock investors happy because it suggests that the firm is looking for new growth avenues.
While LYV stock’s performance has been impressive over the past few months, it has also made the stock expensive. The 25% rise in Live Nation’s share price has driven the firm’s forward price-to-earnings ratio to a whopping 631%. That’s a huge number, especially for a company like Live Nation, which isn’t offering any kind of remarkable new service. Compare that to Amazon.com’s (NASDAQ:AMZN) forward P/E of 134.62, and it should give you some hesitation. Are you really willing to bet on that much future growth for LYV stock?
Part of the reason I’m hesitant to assume that LVY stock is worth as much as its share price suggests is that the live events space in which it operates could be due for a major overhaul in the years to come. Shifts in the tech space have made it more possible than ever to feel included in events from the comfort of your own home. We saw this happen with movie theaters, and live events could be next on the list. As virtual reality gains traction and social media companies use live streaming to draw in users, live event companies may start to struggle.
The Bottom Line
LYV stock looks to be on a solid path right now, but that doesn’t mean the firm won’t face any headwinds in the years ahead. Live Nation stock is simply too expensive to bet on right now so investors who didn’t jump on board before the most recent rally might want to wait for a pullback before taking a position.
As of this writing, Laura Hoy was long AMZN.