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On Friday, Wells Fargo (NYSE:WFC) analyst Omar Mejias issued an upgrade for Universal Music Group NV (AS:UMG:NA) (OTC: UMGNF), changing the stock rating from Equal Weight to Overweight and increasing the price target to €33.00, up from the previous €28.00. Mejias anticipates a reacceleration in the company’s revenue growth, particularly in subscription services, which is expected to outperform the market’s current projections.
Mejias adjusted the compound annual growth rate (CAGR) for Universal Music Group’s subscription revenue from 2026 to 2028, raising it from 8% to 10%, compared to the street’s expectations of around 6-7%. This revision is based on the belief that UMG’s revenues can reach the higher end of the company’s Capital Markets Day (CMD) targets.
The analyst highlighted that Universal Music Group previously traded at approximately 19 times its enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) when its growth was strong and evident. Currently, the multiple stands at around 15 times. Mejias suggests that with the reacceleration of subscription revenue growth, the valuation multiple is likely to adjust upwards, closer to its historical levels, supported by UMG’s dominant market share and the potential for a U.S. listing.
Wells Fargo’s new price target is based on an 18 times multiple of UMG’s projected CY26E EBITDA of €3.3 billion, leading to the new €33 price target and upgraded Overweight rating. Mejias expressed confidence in the company’s prospects, underpinned by its leading industry position and the anticipated positive shift in revenue dynamics.
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