On Thursday, Jefferies financial firm initiated coverage on Universal Music Group NV (AS:UMG:NA) (OTC: UMGNF) stock, assigning a Buy rating with an increased price target of €33.00, up from the previous €31.00. The firm's outlook on the music company is optimistic, citing the robust growth potential of the music streaming industry.
The music streaming market, which is valued at approximately $28.5 billion, is projected to grow at an annual compound growth rate of over 11% over the next five years. Jefferies believes that Universal Music Group's strong portfolio of artists, including names like Taylor Swift, the Weeknd, and Rihanna, positions the company favorably for long-term success.
Universal Music Group's financial performance is highlighted by its industry-leading return on invested capital (ROIC), which stands at over 35%, compared to Warner Music Group's approximate 20%. The seasoned management team at Universal, with a combined 76 years of music industry experience between the CEO and CFO, is also seen as a key strength.
The price target set by Jefferies is based on 19.5 times the firm's forecasted fiscal year 2025 EBITDA for Universal Music Group. This valuation is consistent with the company's historical average, supporting the rationale behind the price target increase.
Investors and market watchers now have a revised metric to consider when evaluating Universal Music Group's stock. This metric reflects the firm's confidence in the company's growth trajectory and market position.
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