LOS ANGELES (CelebrityAccess MediaWire) — Analysts at financial services company Stifel Nicolaus have downgraded Live Nation stock from Buy to Hold after expressing concern about the increasing pressure that artists guarantees may be exerting on the promoter.
"The issue for us increasingly is concern that escalating artist costs are capturing the bulk of the economic gains from the secular growth in the concert business. In years when the economy is weak the extent of those fixed artist costs is evident as is the case this year. This has led the story to be more cyclical in nature and accordingly we reduce our implied valuation multiple. " the Stifel Nicolaus analysts said in a recent report published in Barrons.
According to the analysts, too much attention has been focused on apparent low ticket demand, while they maintain that the live music industry is suffering instead from a supply problem, caused by the pressure on artists to tour heavily to make up for other lost revenue streams such a recording royalties. They also pointed to the value of Front Line Management for Live Nation.
"This need to restructure the artist commitments, places Front Line at the core of Live Nation and, counter-intuitively, Front Line not being wholly owned by Live Nation is helpful in terms of lending credibility to it promoting a more balanced payment structure for tours." the analysts wrote.
Despite the challenges that Live Nation currently faces, the Stifel Nicolaus analysts remained upbeat on the promoter giant, taking pains to note that they had not adjusted their end of year estimates for the company and fixing their estimation of the company's fair value in the $10.00-$11.00 range. Live Nation closed trading on Thursday at $9.23. – CelebrityAccess Staff Writers