Two weeks have been a whirlwind for the music industry since Universal Music Group began trading on Euronext Amsterdam on September 21, giving record companies and publishers a step ahead of global investors. UMG’s first day of trading valued the company at around $ 57 billion, precipitating a 12.2% increase in the share price of rival Warner Music Group. The blows kept coming.
Then WMG shares rose 2.3% to $ 45.64, an all-time high that valued the company at around $ 26.8 billion, and closed at $ 45.18 on Friday, October 8 (Monday at midday, it hovers around $ 45.50), after Morgan analyst at Stanley Ben swinburne raised its price target for WMG from $ 46 to $ 53 and raised its outlook for the music industry. In setting out his case, Swinburne cited “higher long-term streaming prospects and heightened expectations for emerging digital platforms”, particularly in Asia, as well as signs that consumer demand is accelerating as the markets reopen.
Morgan Stanley now has the highest price target for WMG out of 15 analysts tracked by Refinitiv, which previously ranged from $ 34 to $ 50 per share. Separately, Morgan Stanley bought 2.34 million WMG shares at $ 44.00 on September 22, the day after the price spiked 13.4% to $ 45.64 on the day UMG went public. .
The labels are placing their hopes on new money generators to add extra dollars to their bottom line. Three major players – Facebook, TikTok, Peloton – license WMG content, supplementing the royalties received from ad-supported and subscription-to-demand services.
CEO Stephen cooper said these promising revenue streams provide WMG record companies with $ 235 million annually. Morgan Stanley estimates that these burgeoning revenue streams will reach around $ 600 million by 2025.
The U.S. market, the world’s largest, is buzzing – revenues increased 27% to $ 7.1 billion in the first half of 2021 compared to the period a year earlier, according to RIAA statistics released on September 13. 13% year over year and 41% over two years.
Earnings from new platforms and existing streaming services will increase artist exposure and improve record label results. Morgan Stanley increased its WMG revenue forecast for fiscal 2023 from $ 6.56 billion to $ 6.81 billion. Morgan Stanley’s $ 250 million adjustment to forecast revenue comes almost entirely from recorded music streaming revenue and added $ 56 million to EBITDA, up to $ 1.58 billion, over the course of the ‘fiscal year 2023.