Live Nation Entertainment (NYSE:LYV), parent of Ticketmaster and Live Nation Concerts, has been negatively impacted as much as any business from the coronavirus crisis. Bans on large gatherings are likely to continue until the world's population has access to an effective COVID-19 vaccine.
With no live events, the company estimates it is going through cash at an overall rate of $185 million per month, which means it will be out of free cash in about 10 months. So let's look at why the company sounded optimistic in its recent second-quarter earnings release on Aug. 5.
Live Nation expects its cash burn rate to continue through the end of 2020. As of June 30, the company has liquidity of $2.7 billion, including available debt capacity. The company believes it has enough to survive "until the expected return of concerts at scale in the summer of 2021, preceded by ticket sales earlier in the year."
Its optimism isn't just due to its balance sheet. The company said live music fans are showing that demand is intact by holding onto tickets from postponed events, rather than seeking available refunds. Its data shows that 86% of fans have held onto tickets to attend rescheduled shows.
Live Nation said it expects "a robust outdoor summer season in 2021." Between the held tickets for rescheduled shows and festivals, and early ticket sales for festivals being held next year, the company said it has already sold 19 million tickets for 2021.
This is good news for investors as long as 2021 plays out as the company expects. For that to happen, though, a COVID-19 vaccine will need to be available and effective. Without one, it's hard to picture filling up concert venues, and that is what Live Nation ultimately needs to survive.