Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Live Nation Entertainment (NYSE: LYV ) finished out the trading day with an 8.4% gain after starting the day with a 12% pop. This performance comes a day after the concert venue promoter reported better-than-expected revenue -- but underwhelming earnings.
So what: Live Nation's fiscal fourth quarter showed a 12% year-over-year rise in revenue to $1.61 billion, which included an 18% year-over-year rise in concert-specific revenue to $1.08 billion. This handily bested Wall Street's consensus of $1.46 billion, but Live Nation's $0.42 loss per share -- while much narrower than the $0.85 loss per share seen in the year-ago quarter -- was worse than the $0.34 loss per share analysts were expecting.
The market seemed eager to key on Live Nation's report of record annual revenue, which rose 11% to touch $6.48 billion for the year and which helped the company narrow its adjusted annual loss to only $0.04 per share. The world's largest concert and megaevent promoter was responsible for a whopping 22,852 events that drew roughly 60 million attendees, and also managed the sales of 400 million total tickets. The company ended its 2013 fiscal year with $434 million in deferred revenue, 19% more than it finished with in 2012, and reported a 12% year-over-year rise in concert ticket sales and an 8% year-over-year rise in Ticketmaster sales as of February 15th.
Now what: Live Nation's stock has been a rocket ever since the start of 2013, and investors are already sitting on a double for the past year. The company's GAAP losses have narrowed significantly, but two important measures -- revenue and free cash flow -- have not kept pace with the rise in share price. That may not actually matter much, as Live Nation's trailing 12-month free cash flow, while "only" up 23% over the past year, results in a current price-to-free-cash-flow ratio of 16.5, which is perfectly reasonable for a company that appears to still be improving. On balance, today's pop might be a signal to investors that this once-hated company isn't done improving. It might be time for value-hunters with an eye for strong free cash flow to dig a little deeper.
Want more news and updates? Add Live Nation Entertainment to your Watchlist now.
Another great entertainment investment
Concerts and sporting events aren't going anywhere, but the cable TV powerhouses you've gotten used to are steadily losing their grip on America's precious free time. But do you know how to profit from this seismic shift in the entertainment landscape? There's $2.2 trillion out there to be had. Currently, cable grabs a big piece of it. That won't last. And when cable falters, three companies are poised to benefit. Click here for their names. Hint: They're not Netflix, Google, and Apple.