Live Nation Stock Gets an Upgrade. Demand for Concerts Is Staying Strong.

Shares of Live Nation were rising 0.8% Thursday to $78.38. The stock has gained 12% this year.

“The company has a long runway for sustained low double-digit growth driven by increasing consumer demand for concerts and live entertainment,” Welles said in a research note.

The desire to go to concerts surged following the Covid-19 pandemic, when music artists had to cancel their shows during mandatory lockdown periods. But roughly three years after the pandemic hit U.S. shores, artists like Beyoncé and Taylor Swift are still seeing tickets for their stadium tours sell out.

“It’s not a pent-up demand. It’s not a one-time because, ‘I had some stimulus money from Covid’. This is a structural global change around experiences, magic moments that make a difference,” Live Nation Chief Executive Michael Rapino said while speaking at a conference last month.

Live Nation is scheduled to report third-quarter earnings on Nov. 2. Analysts surveyed by FactSet expect to see a 13% increase in revenue from the same period last year. Such growth would come even as consumer has been consistently pinched by rising interest rates and stubbornly high inflation, driving up the price of gas, housing, and grocery bills.

Guggenheim analyst Curry Baker also raised his price target on Live Nation to $125 from $124 and maintained his Buy rating. Despite these consumer headwinds, customer demand for Live Nation is showing “no signs of softness,” he wrote Thursday.

In addition to the pressures on consumers, Live Nation faces regulatory risks. Added fees in the live entertainment and travel industries have come under increased government scrutiny, particularly after last year’s Ticketmaster debacle during ticket sales for Taylor Swift’s Eras Tour.

The company has defended its model, saying previously that it has long advocated for all-pricing—which shows prices, including fees, upfront.

 “We continue to believe that our vertical business model of competing hard and paying the most for concerts and then making our money on secondary and tertiary profit streams is both pro-competitive and pro-consumer,” Chief Financial Officer Joe Berchtold said last month at the Goldman Sachs Communicopia & Tech Conference.

Welles writes that Live Nation investors are mostly concerned with whether or not the Justice Department will bring a lawsuit to break up the company, whether that would be successful, and if TicketMaster’s profitability would be hit if it becomes separated from Live Nation.

“We think each of these concerns have a significantly lower probability than generally appreciated,” Welles said.

Write to Angela Palumbo at [email protected]