‘Buy’ Live Nation

Shares of Live Nation surged in early December on news that Credit Suisse started coverage of the company with an “Overweight” rating and a $28 price. Goldman Sachs also initiated coverage on LN with a “Buy” rating and $27 price target.

Credit Suisse analyst William Drewry said asset sales and new contracts are likely to boost profit margins and “could move the stock significantly higher over the next 12 to 18 months.”

Goldman Sachs also cited possible asset sales – specifically, non-core businesses such as theatre and motor sports properties – as well as a real estate evaluation commissioned to CB Richard Ellis that was recently completed. Like Credit Suisse, Goldman Sachs pointed to key contracts with Ticketmaster and Aramark that are up for negotiations in 2008.

Drewry said the company is “evolving into a one-stop shop for musicians, live entertainers and concert audiences.” He said music industry economics have made touring more appealing to artists because they can earn more money on the road than from record deals.

Goldman Sachs touted LN as a source of investor opportunity: “Executing an aggressive new strategy with a reset asset mix could expand operating margins by 400-plus basis points and deliver 23 percent annualized EBITDA grown over the 2007-10 forecast period, driving the valuation.”

Bottom line, “We see 30 percent potential appreciation in shares of Live Nation over the next 12 months to our $27 price target … as the company moves to improve its asset mix and execute against several critical strategic opportunities.”

Among the strategic opportunities cited by Goldman Sachs are integration of “a refined venue portfolio that now includes House of Blues; new vertical businesses including merchandising, fan outreach and digital distribution; and interfaces with customer touch points such as food and beverage sales and ticketing.”

Live Nation shares surged December 1st with the release of both Credit Suisse and Goldman Sachs reports, spiking December 4th at a high of $24.55 per share.

The company’s opening share price was $10.55 when it debuted on the New York Stock Exchange December 21, 2005, after being spun off from Clear Channel Communications.