Will Live Nation Win From This 'Seismic Shift'?

In a report issued Thursday, Macquarie analysts Amy Yong and Andrew DeGasperi reiterated an Outperform rating and $32 price target on shares of Live Nation Entertainment, Inc. (NYSE: LYV).

The analysts mentioned a “seismic shift in the music industry." Concerts have become the artists’ main income source. This trend, the firm believes, will continue to drive a sturdy concert pipeline and double-digit ad and sponsorship growth for Live Nation. As such, the analysts think its multiples are bound to surge to reflect these dynamics, its leading position in the entertainment business and the conversion of Ticketmaster into a tech platform.

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Impact

According to the report, free cash flow per share is positioned to increase at a 16 percent compounded annual growth rate through 2017, driven by four factors:

1) “Concerts are the flywheel where there’s lots of room left for organic/inorganic growth.”

2) Sponsorship and ad growth will be fueled not only by traditional deals, but also by digital and mobile opportunities, especially with Jordan Zachary serving as Chief Strategy Officer. The company’s partnership with Yahoo! Inc. (NASDAQ: YHOO) puts it in contact with a bunch of blue-chip advertisers, including Citigroup Inc (NYSE: C), Kellogg Company (NYSE: K) and Sprint Corp (NYSE: S).

3) As Ticketmaster continues to evolve, and encompasses an attractive brands portfolio.

4) Finally, Macquarie models 4 percent growth in Artist Nation’s AOI and “in line with last year, which now counts 60+ managers and 280+ artists. This will benefit Live’s concert business but we expect a slight increase in SG&A driven by the hiring of new managers,” the analysts explain.