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LYV stock chart

To help me better understand the stock market and really what drives it, why is Live Nation's stock trading so high in the middle of a pandemic that's brought its entire industry (live entertainment) to a grinding halt? Live Nation is the number one or two largest live-entertainment producer in the entire world (AEG being the other, a non-publicly-traded company).

Live Nation's share price is at early-2019 levels, a time when the industry was rocketing on a decade-long historic run that is maybe more impressive than any other industry (generating record revenue each successive year for at least the last 5). More people were attending live events in 2019 than in the history of the industry with single events (individual music festivals) selling half a million tickets. And right now it's at a complete standstill with no end in sight–no idea how many years until an indoor stadium can be filled again–yet the biggest player's share price looks relatively healthy.

NYSE: LYV
Live Nation Entertainment Wikipedia

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  • Can you take a screenshot of the relevant information in your Google link? The link could become stale in the future.
    – Flux
    Sep 3 '20 at 6:11
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    "To help me better understand the stock market and really what drives it" It's worth noting that nobody, at all, understands the stock market or has any clue what drives it. If anyone did, that person would be the richest on Earth, but nobody has a clue. (Warren Buffet was for years held up as someone who was good at guessing, but, he just lost 10s of billions, he knows nothing either.) Nobody has a clue.
    – Fattie
    Sep 3 '20 at 13:08
  • This kind of question asking why a particular stock has dropped/risen in price is off-topic. Sep 3 '20 at 17:53
  • What do you mean, so high? It clearly fell about 25%
    – user253751
    Sep 4 '20 at 12:04
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Without digging into the specifics of this company, stock prices aren't just fueled by current activity, but by future cash flows. Most think (or hope) that the pandemic will end in the near future, and that most businesses will return to normal.

That (among other things) is why you've seen the market overall rebound to all-time highs, and could likely be the reason for the optimism for the future for this company.

There could also be other avenues of revenue for the company besides live entertainment, but the bottom line is that the price (whether rationally or not) is focused more on a future normal economy that a transient pandemic.

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    A possible reason for people believing a company in the top-flight of their field might return to normal better/quicker than others is that – by being bigger – it is probably better able to ride out the problems of COVID. Smaller companies in that field are more likely to fold, leaving a bigger share of the pie to those that pull through.
    – TripeHound
    Sep 3 '20 at 13:45
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    Possibly they think there's money in live online events and believe the company is well poised to capitalise on that.
    – Flexo
    Sep 3 '20 at 18:07
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    I recall some years ago Dell published figures showing sales were up 30% on the year before! The share price plummeted. This was because the growth was not as large as had been expected, indicating an approaching downturn. So yes; market price is driven by future expectations rather than current performance. Sep 4 '20 at 6:46
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so high

According to whom?

While S&P 500 is +20% since September, LYV is -19%. An entertainment ETF that represents the industry is -22%. How is that objectively "high"?

Stock price represents the discounted cash flow per share of literally 30-50 years of the future. The pandemic lasts 2-3 years max based on historical timeline of vaccine development.

chart

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    "So high" according to my rudimentary analysis. The stock is at early-2019 levels, when individual festivals had ticket sales up to half million. The event industry is the last industry to open in the last phase of recovery. And even then, which is at least a year away, how many people will feel comfortable being in a building shoulder to shoulder with 20,000 people? And how many supporting businesses (including the performers) will even survive the 1.5-2 year pause on their revenue? It seems to me that the optimism driving this share price is extraordinarily disproportionately high.
    – acidgate
    Sep 3 '20 at 15:27
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    @acidgate The value of a share is, in theory, in the dividends to which you have a right as a shareholder. Sep 3 '20 at 16:02
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    I think the OP's question of "so high" is in comparison to $0, which could be expected, since the company presumably isn't making any money right now and is likely losing it's shirt, like most entertainment companies right now. The real question might be "why are so many people trying to bank on this company surviving?" and a secondary question could be "and why are these investors expecting to make money when things reopen?" I'm good with frame challenge questions, but this Answer seems to completely miss the point of the Question. Sep 3 '20 at 16:55
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    @acidgate In theory the money that isn't given to you as dividends could be given to you as dividends next year, on top of next year's own dividends. So you don't actually miss out on the value just because they decide not to pay dividends now! Freaky...
    – user253751
    Sep 3 '20 at 17:08
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    @acidgate Look at it this way: there is money in the company and there is money that goes out of the company. The stock is based on the total value of the money that will eventually come out of it. But even if no money is coming out right now, that means it's building up inside and it could come out later! Or it's getting used up inside in which case the stock price goes down. Eventually someone gets that money. Either they start paying dividends, or they get acquired, or the company goes bankrupt.
    – user253751
    Sep 3 '20 at 17:32
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Live Nation has a long history of buying out smaller independent venues to ensure that everyone pays Ticketmaster fees. If you assume they have a lot of cash on hand to weather the epidemic, COVID will be forcing a lot of small venues that don't have cash reserves to consider selling, and Live Nation may be able to snap them up at a discount, giving them an excellent long-term gain.

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    "Live Nation has a long history of buying out smaller independent venues to ensure that everyone pays Ticketmaster fees." [citation needed] Sep 3 '20 at 19:02
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    @computercarguy natlawreview.com/article/…
    – spacetyper
    Sep 4 '20 at 3:18
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First of all, Live Nation stock is still way down this year. It may even still be a good buy. ;)

But ultimately stock prices are dictated by the expected future value. As for speculators with a buy and hold strategy, Live Nation may actually have more future value than the average stock. Perhaps, when the pandemic is finally over, there are going to be a lot of people partying it up, which will undoubtedly include large live events. It's not inconceivable that 6 months after the world is (kind of) back to normal that Live Nation has reported record quarterly earnings, along with other recreational based companies.

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  • It's a common misconception that passive investing pushes up the price of shares, but that's simply not true. Share prices are determined by the prices at which people are willing to trade the shares; the distribution of share ownership doesn't enter into it. Passive investors are a substantial fraction of the ownership of shares in indices, but they account for a tiny fraction of the trading volume.
    – Nobody
    Sep 4 '20 at 14:28
  • @Nobody - Note I didn't say it pushes up the share price. I'm simply suggesting it helps explain why so many stock prices move both up and down together. (But I will consider editing for clarity since I only mentioned purchases.) I agree with the large ownership vs small volume, and that's a good point that volume matters more for price change. I'm not sure how small that volume is though. Here is one relevant article: investopedia.com/articles/investing/110315/…,
    – TTT
    Sep 4 '20 at 14:46
  • Here is some further analysis: money.stackexchange.com/a/93806/41775
    – Nobody
    Sep 4 '20 at 14:49
  • @Nobody I like your quote in a comment on that answer, "The key insight is that it doesn't take very many actives to keep price discovery working." I think that is a great explanation as to why my second paragraph is probably not useful. Except maybe that when Live Nation joined the S&P last year it started tracking it more closely than previously? (I'm not convinced that's causation though, but it's certainly plausible if it is.) I'm curious if you think anything is salvageable in the second paragraph?
    – TTT
    Sep 4 '20 at 15:10
  • I think your hypothesis, that prospects for future earnings in a bounce-back recovery are what is driving the price, is a good one. It's all speculation of course, but it seems plausible. There may also be some anticipation of consolidation in the industry; maybe LYV will scoop up market share from smaller players that don't make it. Whatever the explanation, the relevance to the OP's question is that the price is driven by expectations about future earnings, not necessarily what's happening today.
    – Nobody
    Sep 4 '20 at 15:22
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Main thing to realize is that the value of stock is not defined by the value of the company, but only by how much people are willing to pay for the stock. This might sound circular, but there is no inherit relationship between a company and its stock beyond 'if it goes bankrupt it will be delisted'. What needs to be evaluated is what makes a stock attractive to different owners. Traditional traders would typically look at future predicted cash flows of the associated company, then there are many traders which only look at trends in price and don't even care about the associated company, then there are many modern traders that look at the popularity of the CEO and the product of the associated company to determine attractiveness of a stock. The average of all those different investors and gamblers is what determines the value of a stock. And there is no right or wrong to any of those.

So to get back to your question, "To help me better understand the stock market and really what drives it" you shouldn't be looking at the associated company of a stock, you should be looking at the people who are interested in buying the stock. Specifically there are a lot of non-traditional traders who looked at previous market crashes and realized that there is no strong link between a financial crisis and the eventual value of stock, so investing when the market crashes made a lot of sense to them. Obviously that means they take on the bankruptcy risk, so whether they will be eventually 'right' only time will tell or maybe we will make it possible one day to trade even bankrupt stock.

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