After Thursday's close, Live Nation Entertainment (LYV) jumped 5% after crushing earnings and revenue estimates. The summer concert season was a rousing success, with a record 44 million fans attending 11,000 events.
Acts like The Weeknd and Red Hot Chili Peppers drew big crowds, with Live Nation experiencing "double digit attendance growth" compared to pre-pandemic levels across a variety of venues.
It was a great quarter, and it presents Live Nation shareholders with an excellent opportunity to get out of the stock. I'd be a seller of Live Nation for two reasons: The stock's chart, and the special set of circumstances that was created by the Covid-19 pandemic.
First let's go to the chart. Technically speaking, this is not a good stock to own right now, especially in a volatile bear market. Live Nation's chart features a bearish pattern that is so big, I had to use the weekly chart to display it properly.
Live Nation's head-and-shoulders pattern (curved lines) is nearly two years in the making. The neckline of that pattern (dotted line) comes in around $73. Due to the size of this bearish pattern, a break below $73 could push Live Nation to the $50 area, and possibly lower.
Chart Via TradeStation
Need another reason to sell this stock? It's my belief that Live Nation's current level of success is unsustainable. Here's why:
The pandemic created a special set of circumstances, as it sidelined nearly all touring acts. This created pent-up demand among consumers, who were longing for that live experience.
Covid-19 also deprived many entertainment acts of their chief source of income. The days of musicians generating big money from album sales are long gone, and as a result, many bands are no longer recording new music.
In the age of Spotify (SPOT) and other streaming music services, touring has become the main source of income for music acts. As a result, when the pandemic began to subside, a deluge of bands hit the road.
After the party comes the hangover. Now that fans have been satiated, I'm expecting fatigue to set in.
I'm not the only one who is unimpressed with the stock. Jim Chanos, founder and managing partner of Kynikos Associates, recently described Live Nation as an "excessively overpriced stock." Chanos believes the stock could fall 50% from its current levels.
It's true that Live Nation just announced earnings of $1.39 per share, crushing analysts' estimates of $1.06. The company's revenue of $6.2 billion beat estimates by $1.1 billion.
All the more reason to sell now, while the stock is in favor.