Live Nation’s stock price is surging again this month, flirting with a $50 per share price Monday, showing the company has completely blown past a New York Times expose in April and is surging in popularity with investors.
Driving the surge is strong revenue growth of 15 percent year-over-year and EBITDA profits of $571 million over the last 12 months. The stock price has jumped 14 percent in 36 days, moving up from $43.57 on June 1 to $49.69 on July 6, hitting a market cap of $10.4 billion.
Besides the healthy financials and a first quarter that saw the company beat the Street consensus to score a 19 percent increase in revenue and a 24 percent spike in adjusted operating income, buzz about a possible Liberty-backed buyout from SiriusXM is also boosting the stock.
We’ve seen few actual signals that Liberty Media, which owns 34 percent of Live Nation, is seriously pushing for a vertical integration between the concert promoter and the satellite radio provider, but two recent notes from analysts — one pushing the idea of creating a vertically integrated music titan and the other disagreeing — has investors taking a serious look at LYV.
Citi analyst Jason Bazinet likes the idea of SiriusXM buying out Live Nation, saying the creation of the two companies would be a broadcast and live entertainment powerhouse, creating a “vertically integrated music titan” with “several strategic benefits,” like cross-promotion, data-sharing and customer activations. He believes the deal would likely get regulatory approval because it would be a “clean vertical merger.”
Keep in mind, that Live Nation was once part of radio giant Clear Channel Entertainment and was ultimately spun off over anti-competition concerns about combining broadcast radio with concert promotion, freezing out rival promoters. But that was 2005 when terrestrial radio had more of a lock on music listeners, which have now been fragmented by various streaming services and apps like Pandora, which Liberty owns a piece of. Unlike Clear Channel which operated licensed public airwaves, SiriusXM operates satellite radio and is not governed by the same rules set forth by the FCC.
Of course, not everyone thinks combining the two companies makes as much sense. Analyst Sebastiano Petti with JP Morgan thinks the buyout is unlikely and believes the Liberty-back companies already share synergies, like the Advanced Placement tour for popular Sirius station Alt Nation, which Live Nation promotes. The concert promoter seems better served by working with multiple music services including Spotify, Apple Music and the Jay-Z backed Tidal, while Sirius does well with its festival broadcast deals which go beyond Live Nation to include AEG events like Stagecoach, Coachella and Firefly.
Whether or not a SiriusXM deal happens (we think it’s unlikely in the medium term), Live Nation has made a complete recovery from an Easter 2018 article from the New York Times that accused the company’s Ticketmaster division of violating a consent decree set forth by Department of Justice following their merger in 2010. Fear of an intervention by regulators sent the stock plummeting 13 percent, but after a federal investigation never materialized, the stock has rebound 37 percent.