These are top 10 stocks traded on the Robinhood UK platform in July
On Friday, JPMorgan analyst Daniel Kerven increased the price target for Universal Music Group NV (AS:UMG:NA) (OTC: UMGNF) to EUR42.00, up from EUR36.00, while keeping an Overweight rating on the shares. Kerven’s assessment suggests a strong correlation between the fortunes of Universal Music Group and Spotify (NYSE:SPOT), as they are intertwined within the same industry value chain, catering to similar customers and sharing growth drivers.
The analyst pointed out the disparity in valuation growth between the two companies, noting that while Spotify’s stock has surged approximately 300% over the past three years, Universal Music Group’s stock has only risen by 28%. He highlighted that Spotify is currently trading at 70 times its estimated 2025 earnings per share (EPS), compared to Universal Music Group’s 23.5 times.
Kerven believes that Universal Music Group’s story is unfolding as expected, but its valuation has been on hold. Through an analysis titled "Share of the industry economics," Kerven adjusted revenue splits, the potential for non-music subscription revenue, and gross margins to justify a valuation for Universal Music Group that aligns with that of Spotify.
The analysis led to the conclusion that Universal Music Group is undervalued by approximately 100%, supporting the analyst’s view that the company should be trading at more than 30 times earnings and that it could sustain this valuation for many years. This optimistic outlook on Universal Music Group’s earnings potential and market positioning underpins the decision to raise the price target.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.