Bank upgrades Universal Music
October 20, 2023

Investment bank BNP Paribas has carried out a detailed examination of the prospects for Universal Music Group (UMG). The bank has upgraded UMG to ‘Neutral’ as far as its investment advice is concerned and has given a Target Price for its shares of €23 (currently trading at about €24.70). Its results are due on October 26th.
The bank says it has been impressed by the progress UMG has made in challenging the negative narratives in various areas. The bank was more cautious in its Spring report on UMG. The bank now expects a “solid” set of Q3 numbers.
“UMG surprised the market with the rapid roll out of a new ‘artist centric’ model in cooperation with Deezer which benefits majors. While we don’t see the new model as a panacea to LT market share loss headwinds, we think it improves the narrative and de-risks Gen AI music somewhat. While we expect Spotify to follow, ‘onboarding’ the other DSPs will take time. Longer term, we see scope for an industry ‘win/win’ ‘grand bargain’, where labels can benefit from further pricing and improved share in return for improved royalty economics for DSPs where margin structure remains a challenge,” said BNP Paribas.
“We expect a solid Q3 from the music industry across the value chain and importantly supportive commentary on DSP pricing – we expect upbeat churn commentary to support hopes of future pricing. We see FY23/24 consensus adjusted EBITDA expectations (down c5 per cent since spring in US$) as better underpinned and stand in line with consensus (albeit below on FY25),” added the bank
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