Despite its recent forecast of solid subscription-revenue growth through 2028, Universal Music Group has yet to see shares rebound to their pre-Q2-earnings price. Photo Credit: Coolcaesar
Earlier in September, on the heels of a Q2 subscription-growth slowdown, Universal Music Group forecasted solid paid-streaming increases through 2028. But at least for now, investors aren’t rallying behind the major label’s stock.
At the time of writing, Universal Music shares (UMG on the Euronext Amsterdam) were hovering around $26.22/€23.44 apiece – reflecting a small gain on the day and from late August. However, the value is well beneath the $31/€28 or so UMG was fetching towards July’s end but ahead of its second-quarter earnings release.
In that Q2 performance breakdown, the professional home of Taylor Swift, Ice Spice, and Drake pointed to comparatively modest year-over-year subscription-revenue growth of 6.5% to $1.27 billion (€1.14 billion) on the recorded side. Ad-supported recorded revenue slipped 4.2% YoY to $383.44 million/€343 million, per the analysis.
Evidently, the relative subscription-expansion plateau didn’t sit right with the market. UMG plummeted by nearly 25% following the report’s release, and as noted, shares have yet to fully recover.
That’s particularly interesting in light of the revamped growth forecast put out by the business on September 17th, directly before its 2024 Capital Markets Day presentation. As described in this resource, Universal Music is targeting a minimum 7% compound annual growth rate for total revenue through its 2028 fiscal year, fueled in part by an 8% to 10% CAGR specifically for subscription-streaming revenue.
Of course, the forecast represents a boost from the subscription-revenue improvement delivered by Q2 – and, at the high end of the new estimate, the improvement associated with H1 2024. Time will tell whether the prediction comes to fruition and whether UMG shares regain their lost ground.
Closer to the present, it’s worth reiterating a couple noteworthy points on this front. First is the just 2.7% YoY subscriber expansion the RIAA attributed to the U.S. music market for H1 2024. Though paid on-demand streaming also brought a 5.1% YoY recorded-revenue jump as laid out in the same report, both figures fell short of those tied to all of 2023 (5.7% subscriber growth and 10.6% subscription-revenue growth).
Next, Warner Music Group, still making sweeping organizational and personnel changes under Robert Kyncl, posted noticeably different Q2 earnings details than UMG and took the opportunity to drive home its bullish streaming-buildout vision.
Meanwhile, the majors’ relative streaming-growth woes haven’t come at the expense of Spotify (NYSE: SPOT). Notwithstanding its core product’s reliance on the catalogs of Universal Music, Warner Music, Sony Music, and other rightsholders, the platform is riding high in terms of its own subscriber-expansion forecasts and stock price.
The latter cracked a day-end record yesterday and, despite dipping a bit during Thursday’s early trading, has almost doubled since the top of 2024.
