Live Nation’s Non-Shocking Q2
The stock market has been crazy since the highs of late February. Experts warned of a pullback and even potential upcoming bear market following a strong over 10-year bull run since the Great Recession. What happened next you could say met those predictions but not quite in the way they predicted.
What experts predicted was a natural turn after a strong run. What we got was an unnatural shutdown caused by the very natural world impact of COVID-19. Over the course of a month, stock markets plummeted. From record highs, many averages fell around 20-30% with several individual companies being affected even worse.
Live Nation (LYV) was one of the bad ones. After a high of $76.60, it ultimately fell as low as $21.70. Concerts, sports, and all forms of live events were quickly cancelled and postponed indefinitely. For a company dependent on events and ticket sales, the fall in share price was greatly justified.
Since late March, the stock market in general has recovered quite nicely. While cases continued to rise, shutdowns continued, economic numbers fell, and business failed, stocks steadily and even rapidly climbed. This has led to a lot of talk and articles about the disconnect between the stock market and the real economy. The explanations for this are plenty: stocks can historically perform well in down economies, the stock market is 6-18 months forward looking, an influx of Robinhood day traders, Fed stimulus, low interest rates, the power of tech and stay-at-home companies. Major indexes were at or near record highs yesterday.
While Live Nation’s stock hasn’t recovered as well as the market in general, it has more than doubled from its low. One could question why when they are dependent on livestream and drive-in events with no real end in sight despite new hopeful dates for concerts in 2021 that still may or may not happen. Sports leagues have returned without fans and are even facing issues with that bare-bones product.
This led us to after hours yesterday when the company held its 2nd Quarter earnings call. When you think about what has happened to its business, the results were not shocking. But wow the numbers are appalling to consider. Revenue was down 98% compared to the same quarter last year. Ninety-eight percent! Ticketing revenue alone was negative due to refunds. Live Nation attempted to paint a pretty picture for the future.
Maybe even crazier is the stock’s reaction to the news. While it almost immediately ticked down $2 or a couple percent after the close, it ultimately ended the after hours session last night down only 1.22%. That’s it after reporting basically a non-revenue generating quarter. Companies have reported beating estimates and seen larger percentage drops.
Now we’ve already talked about the seemingly irrationality of the markets and the disparate impacts to a stock. I’ve also said that while the numbers themselves look shocking, this report was not a shock to investors who can easily see what is happening to Live Nation’s business. Or more importantly, what isn’t happening: events. I could see a further drop today as the reality sets in, but investors largely saw this coming and are looking ahead. The problem for Live Nation though and similar companies in event, entertainment, or travel industries, the future is extremely unclear and dependent on hope, the whims of a virus, and so far unproven medical solutions. Live Nation’s stock and industry need a lifeline.
Full details of Live Nation’s earnings report including a webcast replay, the release, and financial statements can be viewed here.