Vaccine Optimism Leaves Live Entertainment Stocks Vulnerable

Vaccine Optimism Leaves Live Entertainment Stocks
Cheyne Gateley & Yinchen Niu/VIP

Remember what it felt like to attend a concert or festival squished between thousands of people not wearing masks?  

It’s been almost one year since the pandemic brought the events business to a screeching halt, but that could be about to change if all goes well with the vaccine rollout in the coming months. And investors of event companies like Live Nation, Eventbrite and Madison Square Garden Entertainment have been betting on a return to normal as their stocks recently recouped most of their COVID-induced losses.  

Ticketmaster parent company Live Nation reported that concert revenue tanked a jaw-dropping 95% to just $154 million in the third quarter compared to $3.17 billion the same period in the prior year. Sponsorship and advertising revenue plunged 78%. 

However, if you were a Live Nation investor and held on amid the COVID carnage, you probably didn’t see crazy gains, but things weren’t so bad either. Aside from the massive selloff in late March, along with the broader market, Live Nation shares have basically been on a steady upward trend for the rest of 2020. The stock is practically back at the same level it was exactly one year ago, and since the lows in March, it is up a staggering 78%.  

Then there’s fellow events and ticketing company Eventbrite. Much like Live Nation, Eventbrite was hammered at the onset of the pandemic, and financial conditions remained challenging throughout the rest of 2020. Paid ticket volume fell 66% in Q3 from the year-ago period resulting in a 73% decline in net revenue to $21.9 million during the quarter.  

While Eventbrite’s stock performance over the past year isn’t quite as stunning as Live Nation’s, it had a pretty impressive run in the final months of 2020. Since the beginning of November, shares of Eventbrite have surged more than 90%.  

Madison Square Garden Company split into two separate businesses at the end of April. Its entertainment business, MSG Entertainment, has an extensive portfolio of live entertainment brands and venues. Unsurprisingly, COVID significantly impacted the company’s top line. Entertainment revenue, accounting for half of total revenue, sank 94% during its fiscal first quarter to just $7.6 million from $112 million one year earlier.  

And much like Live Nation and Eventbrite, MSG Entertainment stock held up remarkably well considering the tough conditions. The stock is trading at nearly the exact same level it was when it spun off in April. 

It’s hard to argue that these kinds of stock gains in the current environment are sustainable given the level of uncertainty that remains. Sure, markets are forward-looking in nature and investor sentiment is what drives stock moves in both directions. Optimism is high, and the assumption is that in-person events will eventually make a full comeback.  

In addition to optimism, events companies have made serious efforts to ramp up virtual events as in-person events are still on pause. Those efforts should be lauded, but there is still a serious lack of visibility in terms of when events will return to normal and the true level of pent-up demand.  

In VIP’s December COVID impact report, a survey found that 62% of Americans were still very uncomfortable with the idea of attending in-person concerts. While that number may have shifted a bit since the report was published, it likely wouldn’t have swayed enough to make a meaningful difference for events companies just yet.  

Too much of the future of events and the events business hinges on the timely vaccine rollout. Dr. Anthony Fauci previously stated that the hope is for concert venues and theaters to reopen in the fall of this year if all goes well with the vaccine. Key words: If all goes well with the vaccine.  

According to the latest CDC vaccine data, as of Monday morning approximately 50 million vaccine doses have been distributed in the U.S. and 31 million doses have been administered. However, logistical issues have caused significant challenges and delays to the vaccine schedule in the U.S.  

Most recently, it was reported that Americans that were waiting to receive their second dose of the vaccine have had problems making appointments through the online system. There is a specific window of time that is recommended by the CDC between the first and second vaccine doses, and if those windows are passed, it could prove to be an even more complicated issue to address down the line.  

With so much optimism already baked in, until there is a more definitive estimate on the return to normal, the events stocks might be a little too hot to handle at the current levels.  

These stocks are very vulnerable to plummeting any day now because with all the scrutiny on the vaccine process right now, it’s inevitable we’re going to see some degree of headlines that will puncture the market’s optimism on the timing of the return to live events.