Citigroup Lowers Ticketmaster's Estimates and Price Target

From Analyst Mark Mahaney

• TKTM Reported Mixed Q3 Results - TKTM reported lower than expected Rev. & EBITDA of $339MM & $57MM vs. CIR at $345MM & $59MM (hurt by $4MM in severance costs). The company reported EPS of $0.17, beating our estimate of $0.15 with lower interest expense offset by higher than expected taxes.
  

• Not As Sheltered from Macro Slowdown As Expected - TKTM has shown notable resistance to prior economic slowdowns, but Q3 results and management comments on how the current global slowdown is impacting live entertainment reinforces our view that the depth and breadth of this cyclical downturn continues to surprise. With TKTM serving as a potential leading indicator for live entertainment (ticket sales precede event performances), we are incrementally more cautious on Q4 and 2009.
  

• Innovation, Strategic Acquisition, Cost Cutting Are Key Positives For '09 - TKTM highlighted positive results from recent Paperless Tickets innovation and a new "All-In" pricing format designed to improve customer experience. Furthermore, the acquisition of Front Line provides the company with a differentiated offering for its clients. Finally, TKTM reiterated its goal to reduce '09 operating expenses by $35MM. While loss of Live Nation in '09 is a major revenue overhang, we remain impressed with TKTM's competitive position.
  

• Lowering Estimates, & Reducing PT To $9 - Based on 4X our reduced '09 EBITDA estimate of $273MM, down from $281MM previously. We have also excluded $356MM of "client cash" from Net Cash in our valuation. Our '09 GAAP EPS estimate drops to $0.97 from $1.00. Maintain Hold.