Down 15% in the Past Month, is Live Nation Entertainment a Good Stock to Own?

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Leading live entertainment company Live Nation Entertainment (LYV) has witnessed significant improvement in its event pipeline and global client base due to substantial pent-up demand for live shows. However, the stocks price has declined 15.5% over the past month. And given the gloomy picture for the live music industry due to a swift resurgence in COVID-19 cases, will the company be able to recover its financial health anytime soon? Read on.Global Live entertainment company Live Nation Entertainment, Inc. (LYV) promotes live music events and produces, markets, and manages live concerts for artists via global concerts. The Beverly Hills, Calif.-based company operates through three segments: Concerts, Ticketing, and Sponsorship & Advertising.
Pent-up demand for live music events, coupled with the reopening of outdoor activities, has improved the companys concert pipeline for 2022 by double digits versus 2019. But its shares have declined 15.5% over the past month and 5% over the past three months. Although investors are optimistic about the company’s prospects because of its increasing sponsorship commitments and growing branding partners, LYV does not expect to host any major tours before 2022.
And since it could take a few years for the live entertainment and music industry to recover fully from its pandemic-induced downturn, the stocks near-term growth prospects look bleak. In addition, LYVs  growing debt burden and falling revenues could pose a significant risk to the stock.
Here is what we think could influence LYVs performance in the near term:
Challenging Post-Pandemic Outlook for Live Music Industry
The live music market is expected to grow by $2.83 billion during 2021-2025, representing an approximate 6% CAGR. However, due to the pandemics impact on the industry, this represents a significant slowdown compared to  2020 growth estimates. While the widespread availability of COVID-19 vaccines and the pent-up consumer demand for live shows have improved the live music industrys prospects, most businesses are still reeling from the devastating impact. With a substantial decline in advertising and revenue from tickets sold, live entertainment companies like LYV are still struggling to cope with their tremendous operating losses. Furthermore, as the world sees yet another COVID-19 surge with the rapid spread of the COVID-19  Delta variant,  the live music industrys growth prospects look uncertain.
Weak Financials
For the first quarter, ended March 31, 2021, LYVs revenues under its  concert segment declined 76% year-over-year to $239.4 million. Its ticketing revenue fell 90% year-over-year to $28.3 million, while its total operating loss rose 76% from the prior-year quarter to $303.2 million. LYV reported a $307.19 million net loss,  representing a  66.2% year-over-year increase. Its loss per share rose 53.2% year-over-year. The companys adjusted free cash flow came in at a negative $225.7 million, while its net cash provided by operating activities declined 88.2% year-over-year. As of March 31, 2021, its net long-term debt stood at $5.29 billion.
LYVs 15.7% trailing-12-month gross profit margin is 69% lower than the 50.7% industry average Furthermore,  its trailing-12-month net income margin, ROE, ROA, and EBITDA margin are negative 235%, 2,845.1%, 16.9%, and 169.9%, respectively. Also, LYVs negative $1.64 billion trailing-12-month cash from operations compares with the $363.87 million industry average.
Premium Valuation
In terms of trailing-12-month EV/Sales, LYV is currently trading at 27.26x, which is 797.7% higher than the 3.04x industry average. In addition, the stocks 805.49 forward EV/EBITDA multiple is 7,519.5% higher than the 10.57 industry average of 10.57. LYVs 21.07 trailing-12-month Price/Sales compares with a 2.10 industry average.
Unfavorable POWR Ratings
LYV has an overall F rating, which translates to a Strong Sell in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree. 
Our proprietary rating system also evaluates each stock based on eight different categories. LYV has a D grade for Growth and Quality. The stocks weak growth prospects and low profitability are reflected in these grades.
Also, it has an F grade for Value, which is consistent with the stocks stretched valuation multiples.
In addition to the grades weve highlighted, one can check out additional LYV ratings for Sentiment, Stability, and Momentumhere.
LYV is ranked #11 of 14 stocks in the F-rated Entertainment Sports & Theme Parks industry.
There are several top-rated stocks in the same industry.Click here to view them.
Bottom Line
Even though substantial improvement in its concert pipeline and pent-up demand for live shows have raised investors hopes for LYVs stock, given that the pandemic has strangled its revenue and profitability, it could still be a long time before the company can generate  sustainable growth. In addition to that, since the live music industrys recovery could face bumps on the road due to the resurgence of COVID-19 cases, LYVs stock could show further weakness. So, we believe its wise to avoid the stock now.
LYV shares were trading at $79.44 per share on Monday morning, up $1.73 (+2.23%). Year-to-date, LYV has gained 8.11%, versus a 18.43% rise in the benchmark S&P 500 index during the same period.
Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization.
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