Will Live Nation Entertainment (NYSE: LYV) Return to Pre-Pandemic Heights?

The Q2 numbers weren’t pretty for Live Nation Entertainment NYSE: LYV, to put it gently: revenues down 98% yoy and an adjusted operating loss of $432 million.

First, let’s address the elephant in the room: Will LYV survive the pandemic or will it join the countless other companies that have recently succumbed to bankruptcy?

Live Nation Positioned to Weather the Storm

As of the end of Q2, Live Nation was estimating an operational cash burn rate of $125 million per month and a gross burn rate of $185 million per month for the remainder of 2020. Those numbers could have been even higher, but LYV implemented $800 million in annualized cost reductions and cut its cash usage by $1.4 billion compared to its pre-pandemic plans.

In May 2020, the company raised $1.2 billion in debt at an interest rate of just 6.5%, despite the uncertain conditions. The company now has over $2.7 billion in available liquidity, and total debt of $4.9 billion with a weighted average cost of 4.4%.

That debt load is a bit high for an $11 billion company, but the low-interest rates take away much of the concern. With interest rates so low, Live Nation has been able to get the cash to weather the storm without taking on crushing, large monthly payments far into the future.

With liquidity concerns allayed, let’s look at Live Nation’s operations.

LYV is Doing What It Can to Salvage 2020 Revenue

I’ll be clear:

There’s no chance that LYV’s Q3 and Q4 2020 comps are going to look good. But they should be a lot better than Q2. Sure, Live Nation can’t pack huge stadiums to the brim for concerts – and won’t be able to anytime soon. But the company is putting on events that protect customers from the virus, while offering modified (and fun) entertainment. Here are two examples:

1. The company held its first-ever U.S. drive-in concert series from July 10-12. Each vehicle got its own parking space to achieve social distancing.
2. LYV is now doing virtual concerts; in Q2, the company “had 67 million fans view over 18,000 concerts and festivals globally.”

These types of events aren’t going to get Live Nation back to pre-pandemic levels – or even halfway there – but they can generate some revenue. And post-pandemic, some of these events may stick and have long-term staying power.

The drive-in concerts and virtual events are all well and good, but what’s most important is when will live events return to pre-pandemic levels – and with them, Live Nation’s revenue?

Encouraging Signs for 2021

Live Nation is anticipating that “live events will return at scale in the summer of 2021, with ticket sales ramping up in the quarters leading up to these shows.”

Is that realistic?

There are reasons to believe it is based on Live Nation’s data and external news.

Live Nation’s Data

There is a lot of COVID-related uncertainty, but most fans are still holding on to their tickets. As of the end of Q2, 86% of concert fans were keeping their tickets for rescheduled shows. Two-thirds of fans are keeping their tickets for canceled festivals so they can go to next year’s festival.

And new ticket sales are tracking even higher than 2019 levels. Live Nation has sold 19 million tickets to more than 4,000 concerts and festivals scheduled for 2021.

All indications are for a big bounce back in 2021. People have been cooped up inside for so long and seem prepared to make up for lost time next year. Live Nation stands to benefit.

But will COVID-19 allow it?

Testing & Vaccine Development Are Progressing

A vaccine looks to be several months away – at best – but rapid testing may be widespread in the near future.

Abbott NYSE: ABT recently got FDA approval on a $5, 15-minute test, and plans to manufacture up to 50 million tests per month by October. The use-cases are still being explored, but the potential to make mass gatherings like concerts safe in the age of COVID is clear.

And with several companies on the verge of developing an effective COVID-19 vaccine, we may not have to wait long for the virus restrictions to completely, or almost completely, end.

Shares Are in Pullback Mode

LYV shares looked to be in an emerging up-trend as recently as a week ago, breaking out of a series of short-term consolidations. The 50-day moving average looked primed to cross over the 200-day moving average. But shares are now on a six-session losing streak and have broken below support.

Not what you want to see, but the good news is that volume has mostly been light, indicating that there is not a lot of conviction behind the move. If shares can stage a reversal, look for the up-trend to resume.