With the company making improvements to rectify some of the troubles from last year, one of the nation’s leading analysts who tracks Live Nation has upgraded its stock rating from “hold” to “buy.”
Ben Mogil of Stifel Nicolaus & Company believes that fewer shows at Live Nation’s amphitheaters in 2011 compared to 2010 will have a positive result, in part because it will cut down on loses associated with those venues. At 11 representative amphitheaters Stifel tracks, Live Nation has booked 132 shows this year, down 47 percent from 251 last year.
“Key to our rating change is the virtuous cycle a reduced show count generates. By tightening up supply in weaker markets, some of the pricing discounting and excessive unsold inventory we saw last year, will be partially mitigated this year as show supply more accurately reflects the addressable market,” Mogil wrote in an investor report this week. He added that while Live Nation might add some shows at its amphitheater throughout the summer, the final number will still be far lower than in 2010.
Live Nation’s stock, which trades under the symbol LYV, was priced at about $11.14 per share at 2:15 p.m. EDT today, April 29; Mogil set a target price for the stock of $13.
Mogil’s report precedes the release of Live Nation’s First Quarter results, which the company has scheduled for Thursday, May 5 with a conference call after the close of the market that day.
Last year, Mogil downgraded the stock to the hold rating following the company’s tough summer concert season.
“We believe that show count reduction, counter-intuitively, is the key to reducing the nearly $90mn amphitheater loss last year (exclude ancillary revenues and ticketing rebates) as last year Live Nation overextended some tours and ended up with a number of highly unprofitable dates,” Mogil wrote. Last year was the company’s first since its merger with Ticketmaster.
Slow ticket sales led Live Nation to hastily cancel some shows and tours in 2010, and one of the company’s objectives in 2011 was to reduce the upfront guarantees the company typically pays artists, a move that would seem to be at odds with Live Nation’s artist management arm which seeks to maximize those fees.
But, one way to reduce those costs is to book fewer shows, which appears to have made a positive impact on early ticket sales.
“Our proprietary ticketing tracking survey which tracks the pricing and availability of shows across a number of more economically challenged regions, again the likely weak areas in last year’s results, continues to show improvements in terms of availability (i.e. less availability) as pricing was moderated this year and again tour schedules were rationalized,” Mogil wrote.
