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On Friday, JPMorgan reaffirmed a positive outlook on Universal Music Group NV (AS:UMG:NA) (OTC: UMGNF), maintaining an Overweight rating with a EUR36.00 price target. The analyst's assessment hinges on the company's long-term growth narrative, which he believes is fueled by the ongoing shift to streaming and subscription models that enhance the monetization and quality of earnings in the music industry.
JPMorgan highlighted the inherent value of music as "unique content" that cannot be duplicated, emphasizing that the same songs are enjoyed repeatedly, providing consistent revenue in a streaming-dominated market.
Universal Music Group's expansive portfolio of 8-9 million copyrights was noted as a significant asset, alongside a growing annuity stream and a platform that supports artists, songwriters, and independent labels in achieving success and optimal earnings across various geographies and revenue streams.
The analyst pointed out that the company's catalog offers clear visibility, with high single-digit organic growth and mid double-digit earnings growth. These factors, according to JPMorgan, justify a 30x price-to-earnings (PE) multiple that could be sustained over a decade or more, given the substantial opportunities for increased market penetration and average revenue per user (ARPU) from currently low levels.
JPMorgan also provided a financial outlook, observing that excluding its stake in Spotify (NYSE:SPOT), Universal Music Group is trading at less than 21 times its projected 2026 earnings. By 2028, he predicts the company will trade at just 12 times earnings with minimal leverage. He suggested that a 202B PE of 30x could imply a share price of C52 or approximately €40 when discounted back to the present.
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