Live Nation Entertainment (NYSE:LYV) sold over 485 million concert tickets in 2019, making it the leading live music company in the world. With live events put on hold during the pandemic, its revenue plunged 84% to $1.86 billion last year. But according to a Goldman Sachs analyst, it's now time to buy the stock.

Stephen Laszczyk recently set a $110 price target on the stock, which is about 40% above the current quote of $78 per share. Laszczyk argues the company is well positioned for a return of live events in the near term. 

However, the stock is already up over 130% since March 2020 -- how much upside should investors expect?

A large crowd at a concert.

Image source: Getty Images.

Live Nation sees greener pastures ahead

Live Nation's strategy is simple: Promote more shows, sell more tickets, and make additional money through advertising to grow the business. Ticket sales made up only 13% of total revenue in 2019. Most of the top line comes from the concerts themselves: concessions, parking, rental income, and service charges. 

It may take a few years for Live Nation to fully recover from the pandemic. At its peak in 2019, Live Nation generated $11.55 billion in revenue. PwC's latest Global Entertainment & Media Outlook report calls for live music business to return to 2019 revenue levels by 2023. 

Wall Street analysts, however, are more optimistic. The consensus has Live Nation rebounding to $5.05 billion in revenue this year before achieving a new record of $12.59 billion in 2022. 

Live Nation is also upbeat about its near-term prospects. In the fourth-quarter earnings report, management noted that 83% of fans continue to hold their tickets for rescheduled events, signaling there is tremendous pent-up demand. 

Management has maintained enough liquidity on the balance sheet, ending 2020 with $2.54 billion in cash to finance the spending and investments needed to position the business for long-term growth. Management also reduced the company's cost structure by $200 million last year, which should allow Live Nation to emerge more profitable from the pandemic. Other investments included investing in concert streaming to expand its money-making opportunities.

In the first-quarter earnings report, management was even more confident about its growth prospects. It reported the concert pipeline and sponsorship commitments for 2022 are up double digits from 2019. 

Moreover, management is targeting a whopping $750 million cost reduction in 2021. The cut seems to be factored into Wall Street's estimates over the next few years. By 2023, the consensus analyst estimate has Live Nation reaching $5.04 in free cash flow (FCF) per share. 

The stock is trading at 15 times that free-cash-flow estimate, but the secular growth trend behind live music could push Live Nation's valuation higher. PwC's research says the music sector will grow at a double-digit rate through 2025, driven by digital streaming and live music demand. 

The stock could be a good reopening play

Live Nation is a strong business with bright long-term prospects. The stock traded at a price-to-FCF multiple of over 30 before the pandemic, so there is potential for significant upside. Based on the 2023 free-cash-flow estimate, that pre-COVID multiple would give the stock a price of about $151 per share, nearly double the current share price. But before the stock can reach such levels, people have to start going to concerts again.

And keep in mind Live Nation is already trading above pre-pandemic levels, despite trailing 12-month revenue being down 93% year over year, so the market is already pricing a strong recovery into the company's valuation.

LYV Chart

Data by YCharts

Investors should also note the recent spike in COVID-19 cases around the U.S. and in other countries means there's still uncertainty regarding if and when local governments reinstate restrictions on public gatherings, which leaves a risk hanging over Live Nation in the near term.

Still, the widespread vaccinations and growing number of scheduled concerts means the worst is probably over for the company. There may be growth stocks out there that have already surpassed their pre-pandemic results, but Live Nation remains an attractive play on the burgeoning long-term demand for live music and events.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.