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The latest analyst coverage could presage a bad day for Live Nation Entertainment, Inc. (NYSE:LYV), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Both revenue and earnings per share (EPS) estimates were cut sharply as analysts factored in the latest outlook for the business, concluding that they were too optimistic previously.
Following the downgrade, the consensus from 16 analysts covering Live Nation Entertainment is for revenues of US$11b in 2020, implying a discernible 3.7% decline in sales compared to the last 12 months. Losses are supposed to balloon 3229% to US$0.77 per share. Previously, the analysts had been modelling revenues of US$12b and earnings per share (EPS) of US$0.24 in 2020. There looks to have been a major change in sentiment regarding Live Nation Entertainment's prospects, with a substantial drop in revenues and the analysts now forecasting a loss instead of a profit.
The consensus price target fell 12% to US$65.62, with the analysts clearly concerned about the company following the weaker revenue and earnings outlook. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Live Nation Entertainment analyst has a price target of US$85.00 per share, while the most pessimistic values it at US$35.00. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
Of course, another way to look at these forecasts is to place them into context against the industry itself. We would highlight that sales are expected to reverse, with the forecast 3.7% revenue decline a notable change from historical growth of 12% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 11% next year. It's pretty clear that Live Nation Entertainment's revenues are expected to perform substantially worse than the wider industry.
The Bottom Line
The biggest low-light for us was that the forecasts for Live Nation Entertainment dropped from profits to a loss this year. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. With a serious cut to this year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of Live Nation Entertainment.
Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Live Nation Entertainment analysts - going out to 2024, and you can see them free on our platform here.
Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.
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