Live Nation: Well positioned, but fairly valued

Live Nation has a monopoly like position in a fast growing concert market with clear pricing power, which is always a good starting point. As far as quality of the business goes we find it highly attractive. It is the growth rate and operating leverage where we have struggled to make a compelling investment case. 

The number of fans attending Live Nation concerts is a key metric, 2016 saw solid growth of 12%, but 2017 was exceptional at 21%. 

Visibility into the growth rate is limited in our opinion, which is the reason we failed to come to a strong conclusion. Yes, Live Nation is taking share, growing internationally, and has compelling tailwinds, but consistent growth of >12% required to justify buying is a big ask in our opinion. 

Numbers in Q1 2018, were very solid, but didn't change the growth outlook for number of fans vs our estimates. Therefore, to be really positive we have to believe that operating leverage will come through, which we find difficult to bet on. 

Compelling long term trend in concert ticket sales. Digital is a tailwind, expanding the user base of concert goers. 

Potential Upside: $46(+4%): DCF based on 10% growth

Sensible Downside: $36(-18%): DCF based on ~6.5% revenue and FCF growth

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