Citi Downgrades Live Nation, Breaks Down 'Tricky' Valuation

Four factors make Live Nation Entertainment, Inc’s LYV valuation "tricky," according to Citi. 

The Analyst

Jason Bazinet downgraded Live Nation Entertainment from Neutral to Sell with an unchanged $63 price target.

The Thesis

Although Live Nation had cash and cash equivalents of about $2.7 billion as of the first quarter, the majority of this comprises items such as client cash, accrued artist fees and collections that the company has made on behalf of others, Bazinet said in the Thursday downgrade note. (See his track record here.)

Only about 14% of the reported total is freely available to Live Nation, the analyst said.

Accounting changes introduced at the beginning of 2019 have brought around $1.2 billion of operating leases onto Live Nation’s balance sheet, Bazinet said. 

Live Nation’s valuation is impacted by minority interest, the analyst said. When the company acquires a majority stake in a festival or promoter, the seller retains a stake in the business, but Live Nation consolidates 100% of the results, he said. 

As a result of this, some part of the company’s adjusted operating income is owned by third parties, Bazinet said. 

Finally, a change made in the amortization of non-recoupable ticketing advances in 2018 has resulted in the company’s adjusted operating income being 10-15% lower than what it reports, according to Citi. 

Price Action

Live Nation shares were down 2.45% at $65.33 at the time of publication Friday. 

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Photo by Doug Goodwin/Wikimedia.