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On Monday, TD Cowen maintained a positive stance on Universal Music Group NV (AS:UMG:NA) (OTC: UMGNF), with analyst Doug Creutz reiterating a Buy rating and a price target of €30.00. The firm’s confidence in the company stems from its status as a leading content owner in the music industry, which is expected to see robust growth.
Creutz highlighted Universal Music Group’s position as one of the world’s largest pure-play content owners with a dominant market share in the music industry. The analyst anticipates that the company will continue to enjoy the benefits of the expanding streaming music market. This growth is anticipated to be fueled by both the market’s overall expansion and anticipated price increases by the leading Digital Service Providers (DSPs).
Furthermore, Creutz pointed out that new deals, referred to as ’Streaming 2.0,’ are expected to include built-in increases to the minimum per subscriber payment to record labels, which should occur regardless of any price hikes to consumers. This aspect is particularly significant as it suggests a favorable revenue trajectory for Universal Music Group.
The analyst also projected that earnings for Universal Music Group would compound at a double-digit rate for at least the next five years, attributing this to both revenue growth and margin expansion. According to Creutz, the margin pass-through on revenue growth could exceed 35%, reinforcing the expectation for continued margin expansion in the coming years.
TD Cowen’s assessment reflects a clear and positive fundamental outlook for the music industry, where Universal Music Group is poised to capitalize on its high-quality content asset. The firm’s reiterated Buy rating and price target affirm a strong conviction in the company’s potential for sustained financial performance.
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