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Reopening Trade: Why Jefferies Is Targeting Live Nation for Massive Upside

Live Nation Entertainment Inc. (NYSE: LYV) shares started out the week with a handy gain after one analyst came forward with a big upgrade. The reopening trade is underway, and as more COVID-19 restrictions are lifting as more Americans are getting vaccinated, companies like Live Nation could stand to benefit a lot, at least according to Jefferies.

Jefferies upgraded to a Buy rating from Hold and raised its price target to $96 from $88, implying upside of 20% from the most recent closing price of $79.96. However, the bull case for this stock includes a price target to $125, implying upside of 56%.

The brokerage firm believes that now is a favorable entry point for the stock, given the pure-play recovery and long-term growth story.

The company reported its quarterly results last Thursday, and there was a resounding topline beat. The strength came primarily from concerts, with revenues of $239 million versus $178 million the prior quarter. Live Nation noted that concerts held in the United States and United Kingdom have shown considerable pent-up demand, with many festivals selling out in record time.

More importantly, management noted that the concert pipeline and sponsorship commitments in 2022 are up double digits from 2019, as demand from larger artists to return to touring is accelerating. Additionally, considerable incremental ticketing clients have been added for over 5 million new net fee-bearing tickets year to date. These elements ultimately bolster Jefferies’s bullish stance.

Jefferies detailed its bull case highlights:

  1. Strong multi-year growth run with double the major tour dates in 2022 and no air-pocket beyond;
  2. International events across U.K, N.Z., etc quickly sold out, Int’l remains an important growth area;
  3. Up-selling with NFT, Blockchain and Digital improvements;
  4. 1H21 cash burn levels to be similar with 4Q20 net cash burn as the business ramps; and
  5. Continue bolt-on acquisitions to expand markets, platforms and channels.

Live Nation stock traded up about 4% Monday morning to $83.12, in a 52-week range of $36.01 to $94.63. The consensus price target is $86.50.