Spotify, Live Nation, UMG, WMG – Billboard

As music companies prepare to report 2021 results, stock prices may have room for growth. How much space? Spotify’s February 2 earnings report likely predicts double-digit growth that could put annual revenue between $12 billion and $13 billion. Billboard estimates that Spotify should improve its number of subscribers from 20 million to more than 200 million in 2022. It also has room for further increases in the price of subscriptions “even if Apple and Amazon have not followed”, says Russ Croupnick, managing partner of research and analytics firm MusicWatch. Spotify, which will report full-year results on February 2, expects its 2021 full-year revenue to have improved 21% to 23% year-on-year to around $10.9 billion. . Additionally, Q4 2021 results will show that its subscriber count grew between 14% and 17% over the year.

All of this is good news for labels and publishers, who rely on streaming services for the bulk of their growth. Shares of Universal Music Group and Warner Music Group are up 29% and 21%, respectively, from their current prices, based on the median of analyst price targets tracked by Refinitiv. UMG’s revenue increased 13% year-over-year (17% in constant currency) in the nine months ending September 30, 2021. WMG’s fiscal year 2021 also ended September 30, 2021. September, with revenue growth of 19% (15% in constant currency).

While revenue growth is essential for stocks to live up to expectations, the money hitting corporate bottom lines will be critical in 2022. For many companies, rising prices and supply chain issues worldwide are compressing operating margins. hit a high” in the fourth quarter, Bloomberg Intelligence’s chief equity strategist Gina Martin Adams said on Bloomberg What goes up podcast on January 14. Adams added a caveat: The spikes in those estimates preceded roughly 20% corrections to S&P valuations in 2011, 2015 and 2018.

However, music company margins are under pressure elsewhere. In November, BofA Securities cut its WMG price target by 21% on expectation of lower margins in 2022 as sales of physical products rebound from lockdown-era lows. Julien Rochemanaging director of Barclays European Media Equity Research, says Billboard that labels and publishers will see “diminishing returns” as musicians receive a greater share of the digital loot. And the money flooding into music investments may leave little upside in acquisitions. For example, take WMG’s purchase of David Bowie’s publishing catalog for $250 million. Passing through a Billboard estimates the deal provides WMG with annual revenue of $6-8 million, Roch calculated the after-tax return to be less than 2% per year. “It’s crazy” for a publishing contract, he says. “And I think recorded [music] is this.” Instead, growth is coming from new uses for music. When Morgan Stanley analysts named WMG their top pick for audio entertainment in 2022, they cited its “next-gen revenue.” increased” from social media, games and fitness apps, not its acquisitions.

Of course, the outlook for some companies will become bleaker as the pandemic drags on. Live music was set for a comeback after the vaccines took hold and the delta variant waned. Instead, the omicron variant swept the world, leading to a wave of concert cancellations. A survey of UK booking agents found more than a quarter of first quarter gigs had been scrapped – mainly because consumers lacked confidence in safety measures and feared a return of new coronavirus restrictions . In early January, Live Nation investors seemed optimistic that fans would turn up for a long list of tours in 2022 and 2023. By the end of the month, however, Live Nation’s share price returned to near its price before climbing after the company’s encouraging third-quarter results. November 5. Now the shares are 13% below the median price target, suggesting that analysts currently see some upside in 2022.

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