Albert Fried Upgrades Live Nation

• Albert Fried & Co has upgraded Live Nation Entertainment, Inc. LYV to Overweight and raised its price target to $34.
• The firm believes the music industry will continue to turn to concert revenue to make up for revenue lost to piracy.
• Recent strength in European auto sales could be an indicator of ticket sales growth in coming quarters.

In a new report, Albert Fried & Co analyst Rich Tullo explains why the firm has upgraded Live Nation. Summer concert season has come and gone, but Tullo sees secular growth catalysts for the company.

Investment thesis
The general investment thesis for Live Nation is that the music industry will turn to concert ticket sales to try to recover lost income from music piracy. “We also argue the live events LYV produces and tickets are defensible in a media eco-system transitioning from traditional to digital distribution,” Tullo adds.

Auto correlation
Tullo points out that auto sales and concert ticket sales are typically closely correlated, as both are popular disposable income spending targets. He sees the strong auto sales growth in Europe in Q3, particularly in the UK, Italy and Spain, as an indication that concert ticket sales growth could also be picking up in the regions.

Risks
Tullo’s investment thesis is largely reliant on disposable income spending, which could suffer if the world falls into a global recession. In addition, Live Nation currently dominates the event ticketing market, but new competition could impact the company’s growth rate.

Outlook
Albert Fried & Co has upgraded Live Nation to Overweight and raised its price target on the stock from $28 to $34. The new price target represents a 12x EV/AOCF multiple on the firm’s 2015 AOCF projection of $580 million. The firm estimates the intrinsic enterprise value of Live Nation at $6.3 billion.

Albert Fried & Co’s new $34 price target represents about 25 percent upside for the stock.

Disclosure: the author holds no position in the stocks mentioned.