Strong Demand For Stadium Shows And Global Expansion Will Drive Future Success

Key Takeaways

• Strong consumer demand and strategic focus on stadium shows are set to significantly boost revenue and earnings across Live Nation’s segments.
  
• Global expansion and increased capital in Venue Nation position the company for sustained growth and enhanced returns on investment.
  
• Uncertainty in market demand, regulatory risks, and mismatched pricing strategies may affect Live Nation Entertainment's revenue, margins, and future earnings stability.

Catalysts

Operates as a live entertainment company worldwide.

• The strong consumer demand for stadium shows, with sell-through rates higher than previous years, indicates potential for significant revenue growth in Live Nation's concerts segment.
  
• The shift towards more stadium shows is beneficial for Ticketmaster, as one stadium event brings similar revenue as ten amphitheater events, likely boosting Ticketmaster's revenue and earnings.
  
• The company’s focus on expanding Venue Nation internationally, particularly with large arenas, is expected to drive future growth in both fan volume and revenue.
  
• Live Nation's continued investment in global expansion, particularly in underdeveloped markets, is expected to sustain double-digit growth in revenue and earnings for the foreseeable future.
  
• Increased capital investment in Venue Nation signals a strategic focus on owning more venues, which is likely to enhance return on investment and contribute positively to future AOI growth.

Live Nation Entertainment Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Live Nation Entertainment's revenue will grow by 10.5% annually over the next 3 years.
• Analysts assume that profit margins will increase from 2.8% today to 3.8% in 3 years time.
• Analysts expect earnings to reach $1.2 billion (and earnings per share of $4.18) by about April 2028, up from $638.2 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $1.7 billion in earnings, and the most bearish expecting $938.7 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 42.3x on those 2028 earnings, down from 43.0x today. This future PE is greater than the current PE for the US Entertainment industry at 20.9x.
• Analysts expect the number of shares outstanding to grow by 0.6% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.98%, as per the Simply Wall St company report.

Live Nation Entertainment Future Earnings Per Share Growth

Risks

• The uncertainty surrounding forward-looking statements and potential risks could impact Live Nation Entertainment’s actual results, affecting their revenue and margins.
  
• Variability in consumer demand and ticket pricing, with reports of high-priced tickets still being unsold, may indicate a potential mismatch between demand and pricing strategy, impacting revenue growth.
  
• Ticketmaster transacted ticket volume seeing only 3% growth compared to a 10% increase in concert tickets suggests inefficiencies or challenges in distribution, potentially affecting earnings.
  
• The ongoing legal concerns and trial with the DOJ pose regulatory risks, which could result in financial liabilities or operational constraints impacting earnings or net margins.
  
• The substantial increase in capital expenditures, while indicative of growth strategies, presents risks if returns on investments do not materialize as expected, potentially affecting net margins and future earnings stability.

Valuation

• The analysts have a consensus price target of $164.625 for Live Nation Entertainment based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $180.0, and the most bearish reporting a price target of just $124.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $31.3 billion, earnings will come to $1.2 billion, and it would be trading on a PE ratio of 42.3x, assuming you use a discount rate of 9.0%.
• Given the current share price of $118.81, the analyst price target of $164.62 is 27.8% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.