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With shares of the big two bouncing back, analysts in Germany and the US are sounding optimistic notes for the sector
By Manfred Tari on 26 Mar 2020
The stock market reaction to the coronavirus has been dramatic and at times immediate over the last four weeks, but after share prices of the big entertainment companies dipped over 60% in recent week, stocks are now rallying.
The experience economy has been one of the hardest hit since the Covid-19 crisis began, and after 2019 underlined the prosperity of live entertainment in general, it’s a year that may be the overall benchmark of success for some time.
But with most governments announcing extensive support programmes, the share prices of CTS Eventim (EVD) and Live Nation (LYV) are now starting to recover (the former which closed yesterday at €38.22, up from €27.54 on 18 March). And this reaction is further backed by analysts’ estimates.
Christoph Bast, analyst at Bankhaus Lampe entitled his recent research report ‘Out of The Dark’. In a “new base scenario”, Bast said “expect a decline in online tickets by 52% in 2020 and the cancellation or postponement of most of the concerts scheduled for 2020.” He predicts that, “once this crisis is over, CTS Eventim should see a strong concert season in 2021.”
Bast’s previous ‘sell’ rating has changed to ‘buy’ with a redefined price target of €43, compared to €45 before the crisis. Bast’s research is similar to estimates by other analysts, which largely see the ongoing business year as a sabbatical, being back on track in 2021.
With most governments announcing extensive support programmes, the share prices of CTS Eventim and Live Nation are now starting to recover
Rating agencies Moody’s and S&P are more concerned about the current situation of Live Nation, with both agencies adjusting their ratings. Moody’s downgraded its rating to BA3 which details that: “Obligations rated BA are judged to have speculative elements and subject to substantial credit risk”, while 3 stands for: “Issuers rated Prime-3 have an acceptable ability to repay short-term obligations.”
S&P last week declared it was scrutinising its rating for Live Nation as well as for Endeavor (WME’s parent company). Endeavor has long terms debts of $4.6 billion on its books, while Live Nation filed a debt of $3.4bn in its 2019 annual report, up from $2.9bn in 2018.
Published on 24 March, a research report on Live Nation by analyst Jason Bazinet at Citigroup changed the stock from ‘sell’ to ‘neutral’ and set a price target of $35. By close of play yesterday (26 March) Live Nation’s share price had risen to $45.90, a substantial climb given that it had dipped to $21.70 on 18 March.
Ongoing concerns for many analysts now sits around cashflow for a sector that is currently in limbo. And while the likes of Live Nation and CTS Eventim may have more options to restructure credit lines currently, the ability to weather the current situation with enough reserves in the bank affects both mid-sized and small operations alike.
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