Analyst Dumps LYV As Stocks Soar

Morningstar equities strategist Paul Larson recently dumped Live Nation Entertainment stock from one of the portfolios he manages for the company, despite LYV’s soaring share price.

“I’ve always liked Ticketmaster’s ticketing business; I figured that any business that could frustrate its customers but still keep them coming back is a business with a competitive advantage,” Larson wrote in the firm’s StockInvestor newsletter and quoted by the Digital Audio Insider blog. “Unfortunately, the merger with Live Nation greatly diluted the attractiveness of the overall company.”

Larson cites the concessions Live Nation and Ticketmaster had to make in order to win Department of Justice clearance for the merger, which provided “a potential bridge across the moat of the ticketing business” for its competitors. Even if it’s only a slim bridge, Larson wrote that it’s the rest of the company’s operations that are “quite unattractive.”

“It owns several concert venues, a business with a high degree of rivalry and modest barriers to entry,” Larson wrote. “Live Nation is also involved in promoting concerts and managing artists, businesses for which I fail to see a moat.”

To Larson, an “economic moat” is a description of how well a company can hold off competition.

“The old Live Nation generated an operating loss in four of the past six years, and the combined entity will also have to deal with roughly $1.5 billion in debt,” Larson continued.

“In sum Live Nation is a financially levered firm with a declining moat and a management team that have done a good job destroying value. No thank you!”

It’s hard to know if investors are paying attention to Larson’s advice. At the end of trading April 13, LYV shares topped the $16 mark, more than eclipsing its 52-week high. And since Live Nation and Ticketmaster Q4 2009 financials were released March 3, shares have spiked more than 14 percent.