Can Live Nation’s Stock Gain 10% Post-Covid?

Comparing the trend in Live Nation Entertainment’s stock (NYSE: LYV), a live entertainment value chain owning ticketing, concert promotions, artist representation, and production, over recent months with its trajectory during and after the Great Recession of 2008, we believe that the stock could likely gain a marginal 10% around the levels of $52, once fears surrounding the coronavirus outbreak are put to rest. Many live events like music concerts and sports have been canceled due to social-distancing guidelines and safety concerns. In fact, Live Nation, the parent company behind Ticketmaster, was essentially shut down by the Covid-19 pandemic.

A detailed comparison of Live Nation Entertainment performance vis-à-vis the S&P 500 is available in our interactive dashboard analysis, 2007-08 vs. 2020 Crisis Comparison: How Did Live Nation Entertainment Stock Fare Compare With S&P 500?

At the end of January, the World Health Organization (WHO) declared a global health emergency in light of the coronavirus spread. The rally in the equity market continued till February 19 with the S&P 500 reaching a record high, but the trend reversed sharply over the following weeks. LYV stock lost 51% of its value (vs. about 34% decline in the S&P 500) between February 19 and March 23. A bulk of the decline came after March 6th, when an increasing number of Coronavirus cases outside China fueled concerns of a global economic slowdown. Notably, though, the multi-billion dollar stimulus package announced by the U.S. government has helped the stock price recover 27% over recent weeks (vs. about 45% gain in the S&P 500) to its current level of close to $47.

LYV Stock Fell Because The Situation On The Ground Had Changed

Live Nation saw the imposition of stay-at-home orders throughout the world during the last weeks of March. Consequently, it saw a 21% year-over-year (y-o-y) drop in revenue, driven by declines in its concerts category. The net loss was almost $185 million, over $130 million deeper than the year-ago quarter’s result. In addition, Live Nation raised $1.2 billion of new debt in order to keep the lights on until this crisis ends.

The company is making considerable changes to its artist contracts. In 2021, guaranteed artist payments are expected to be 20% lower when the concert circuit gets back on track again. To add to this, the artist will need to carry a larger financial burden in an event of cancellation. The simple fact of the matter is that people aren’t going to feel comfortable gathering in groups until they feel safe from the pandemic. This may not be until a vaccine is available at scale.

LYV Stock Fared Worse During The 2008 Downturn

But LYV stock fared worse during the 2008 downturn. LYV’s stock declined from levels of around $22 in October 2007 (the pre-crisis peak) to roughly $3.50 in March 2009 (as the markets bottomed out) – implying that the stock lost as much as 84% of its value from its approximate pre-crisis peak. This marked a much higher drop than the broader S&P, which fell by about 51%.

However, LYV’s stock recovered post the 2008 crisis, to levels of around $9 in early 2010, rising by 142% between March 2009 and January 2010. In comparison, the S&P bounced back by about 48% over the same period.

Will LYV Stock Recover Similarly From The Current Crisis?

Live Nation Entertainment’s stock fell roughly 51% from the market peak on February 19 to the low on March 23, compared to an 84% decline seen in its stock price during the 2008 recession. Also, since it has recovered almost 27% over recent weeks – we believe it can potentially recover by another 10% to get close to $52 once economic conditions begin to show signs of improving. This marks a partial recovery to around the $76 level LYV stock was at before the coronavirus outbreak gained global momentum.

That said, the actual recovery and its timing hinge on the broader containment of the coronavirus spread. Our dashboard forecasting U.S. Covid-19 cases with cross-country comparisons analyzes expected recovery time-frames and possible spread of the virus.

Further, our dashboard -28% Coronavirus crash vs. 4 Historic crashes builds a complete macro picture further. A complete set of coronavirus impact and timing analyses is available here.

While Live Nation Entertainment’s stock has a limited near term upside, here’s how its rival World Wrestling Entertainment’s stock (NYSE: WWE) performance compares to the 2008 crisis.

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