This analyst has been covering Universal Music Group closely (and not always very positively) for years. He just upgraded UMG stock for the second time in a year.

Few monetary analysts have regarded on the music trade—particularly universal music group —As lengthy and shut as William Packer of BNP Paribas Exarn.

Headquartered in London packers The historical past of analyzing the UMG share value (and its potential share value) predates the music firm’s 2021 Euronext Amsterdam itemizing by a few years.

from starting to finish packers Throughout his tenure watching the fortunes of Common Music Group (UMG), he has been optimistic about the way forward for the corporate and the way forward for music rights extra broadly.

Nevertheless, in April final yr, Parker doubled downgrades on UMG’s inventory, expressing considerations about UMG’s potential, and confidence in UMG’s future plummeted. AI harm the worth of the copyright, plus Douyin International affect on music consumption.

Six months after the double relegation, in October 2023, Parker Slight re-upgrade of UMG stock Adjusted from “Underperforming” to “Impartial”.

Whereas remaining cautious in regards to the threats going through main music corporations, packaging machine Admits that latest label-friendly strikes by DSP, together with an “artist-centric” royalty mannequin, have made him really feel extra optimistic in regards to the street forward. Common MG’s in inventory.

At this time (August 29), packaging machine adjusted his view A part of Common Music Group Restocking, that is for Sir Lucian Grange and cooperation: packaging machine It as soon as once more upgraded its inventory score to “outperform” from “impartial”.

To be clear, packers New upgrades have been introduced by way of drop notifications Common MG’s Shares because the firm reported second-quarter 2024 outcomes final month.

In these outcomes, UMG’s total income grew by approx. 10% annual enhancehowever one Annual progress of 6.9% Progress in streaming subscription income (at fixed currencies) fell in need of analyst expectations, sending Euronext shares sharply decrease.

Packer believes that UMG’s present share value (€24.05) Enticing to potential traders: He has positioned it right now €27.50 The goal value of the inventory.

“Common Music Group’s (UMG) weak second-quarter outcomes heightened trade and investor considerations in regards to the progress of music streaming…however we see alternative within the noise,” wrote packaging machine in his analysis notes.

baler noticed Common MG’s He stated subscription efficiency within the second quarter was fairly predictable – he referred to as it “the end result of the streaming dynamics we have been witnessing since 2022.”

Nevertheless, the next A number of analysts downgraded UMG inventory after the second quarter, packaging machine Now see extra causes to be completely satisfied The potential of Common Music Group.

“We’ve been cautious in regards to the 18 million+ streaming subscriptions, pricing, TikTok and artist value headwinds. With expectations [over UMG’s stock] Now rebasing, the streamer remains to be capable of ship wholesome (albeit decrease than beforehand anticipated) income progress within the medium time period, and we see the downgrade as a beautiful alternative. Moreover, we imagine the latest upheaval and proof of gross sales maturation might function a optimistic catalyst for a reset within the DSP/label relationship, driving a brand new “grand discount” of extra pricing for a extra even financial distribution. [This] More likely to considerably enhance present projections from DSPs and file labels.

William Packer, BNP Paribas Exane

packaging machine He stated that pushed by elements such because the slowdown in consumer progress in mature markets, “there’s the prospect of a ‘massive discount’ between platforms (DSPs) and file corporations.”

He stated such “massive offers” would see subscription costs rise, e.g. Spotifyin alternate for these DSPs receiving “a extra even financial distribution” – that’s, to Spotify’s file corporations et al. An even bigger share of the streaming income pie comes as a reward for charging customers increased subscription costs.

Packer stated the “discount” might carry “additional upside” to DSP and UMG.

(Associated: Common Music Group’s present world licensing cope with Spotify is reportedly set to be renegotiated beginning subsequent yr.)

Moreover, apart from this potential “discount,” packaging machine His group believes UMG “stays able to delivering a wholesome service (albeit decrease than beforehand anticipated)” [streaming] Medium-term income progress.”

certainly, BNP Paribas Exane UMG’s subscription streaming income is now anticipated to extend yr over yr7.6% Between 2024 and 2026.

Nevertheless, BNP Paribas stated annual progress might enhance to + as new offers are struck between UMG and DSPs comparable to Spotify9.1%.

Packer famous that over the course of 18 months, BNP Paribas Exane Danger elements identified UMG (Together with TikTok, subscription streaming charges and artist prices) The worth goal is decrease than that of some friends.

Nevertheless, with the consensus Common MG’Parker believes the corporate’s share value is now falling after analysts downgraded it elsewhere BNP Paribas The brand new forecast represents a better-than-consensus outlook.

One other one that is optimistic about UMG’s future inventory efficiency is Invoice Ackerman – Head of UMG 10% Shareholder, Pershing Sq. Holdings, Inc.

Earlier this month, Ackman’s PSH stated in the letter to shareholders: “Much like traders’ preliminary overreaction to considerations in regards to the potential destructive impacts of synthetic intelligence, however because the market higher understood the dangers of synthetic intelligence, UMG inventory value shortly recovered, we imagine that as traders higher perceive UMG obtain increased A path to income progress and renewed confidence within the long-term well being of the trade, the corporate’s inventory value might rise considerably from present ranges.world music enterprise