With Ticketmaster’s stock price (symbol: TKTM) slumped to below $6 per share less than three months from its all-time high of $27, Live Nation has also joined its rival in the sub-$6 per share club. The company’s stock (symbol: LYV) dropped more than 20 percent this week, just days after reporting strong, if not spectacular, earnings for the third quarter ended September 30. Live Nation’s stock has struggled on-and-off for more than a year, but it experienced the dramatic drop following sobering reports from financial analysts about the company’s future. See stock tickers for the two companies below.
Live Nation’s total revenues grew 9.4 percent for the quarter to $1.59 billion, and adjusted operating income grew 16.3 percent to $109.6 million, primarily on the strength of solid gains in ticket sales at North American amphitheaters and international festivals. Partially off-setting those gains was a $5.6 million loss in its overall Ticketing line item as the company prepares to aggressively launch its new ticketing operation in January, which it says is right on track.
In a prepared statement, Live Nation President and CEO Michael Rapino said he was pleased with the overall results. “We generated exceptional results during the third quarter in spite of the global economic downturn. We continued to execute better and grow our core business with virtually all key metrics used to evaluate our business showing improvements. We increased the number of concerts we produced, we grew our ticket sales and improved our revenues and margins. Despite challenging times, millions of fans have continued to attend live concerts to support their favorite artists. Looking ahead, our primary goal remains centered on maximizing our global concert pipe for our client – the artist – and expanding into direct ticketing/online distribution, completing the world’s only concert-to-fan direct platform for artists.”
Yet the quarter did little to placate nervous Wall Street analysts who believe Live Nation’s fortunes are particularly more modest. Two market analysts, James Boyle of CL King & Associates and Alan Gould of Natixis Bleichroeder downgraded the stock as they lamented that slumping consumer confidence could heavily affect spending on entertainment tickets. Boyle changed his rating from “Accumulate” to “Neutral,” while Gould dropped his rating from “Buy” to “Hold.”
“Whether it is higher unemployment, flagging consumer spending, plunging consumer confidence or declining advertising, Live Nation can claim it is more recession-resistant than most, but recent color on ticket sales and discounts to come to try to bolster 2009 sales by a peer suggest that management is too hopeful and we should be more conservative,” Boyle privately wrote to investors this week.
“We are also downgrading Live Nation to Neutral since the recession should be longer than previously expected. The company likes to say its average fan only buys a couple of tickets a year. Conventional wisdom likes to say people still went to the movies during the Depression. Yet, if the fan has less and less discretionary money or just wants to hunker down to survive the seeming storm, some tickets don’t get bought next year. Since Live Nation sells tickets in advance, the wall that the general economy has hit should it going forward, we feel,” he added.
Gould told the Associated Press that he believes Live Nation and other ticketing companies will feel the effects of the recession in the spring and summer of 2009. “Live Nation has not seen a decline yet, but we feel the current recession will be deeper and longer than past recessions,” he said.
A Live Nation spokesperson declined to comment directly about the downgrades. Prior to the analysts’ reports, the company said in a statement that it was optimistic about the rest of the year and 2009. “Live Nation continues to believe that it will be in a position to deliver strong adjusted operating income growth in 2009 and beyond as it continues to grow its core operations, realize the impact of its 2008 investments in venues and launch its ticketing operations.”
Rapino also reiterated his confidence about the future during a recent conference call with investors. “I’m not trying to deliver a message that we’re somehow the only company in the world not affected by the economic downturn. I can only state the facts on what we’ve sold to date,” he said. “Now as you know, 75 percent of our business happens in the summer, so we really don’t really start selling anything of magnitude again till March or April when we sell the summer season. So in October, with regard to AC/DC tickets, you can’t print them quickly enough. Coldplay sold out. Jonas Brothers sold out. So we have seen no ticket effect at all in October. And we hope that by the time we start selling tickets in the spring that this trend continues.”