On Thursday, Exane BNP Paribas (OTC:BNPQY) shifted its stance on Universal Music Group NV (AS:UMG:NA) (OTC: UMGNF), elevating the stock from a Neutral to an Outperform rating. The firm has set a new price target for Universal Music Group at €27.50, suggesting a positive outlook for the company's financial future.
The upgrade follows what the firm identifies as a significant adjustment in market expectations after Universal Music Group reported weaker-than-anticipated results for the second quarter.
According to the analyst, the recent quarter's performance reflects ongoing trends in music streaming that have been observed since 2022. Despite the underwhelming results, the firm sees a silver lining, proposing that the reset in streaming growth expectations could lead to potential gains against the consensus.
The analyst also suggests that the current market conditions may promote a more favorable agreement between digital service providers (DSPs) and record labels. This potential 'grand bargain' would aim for a fairer distribution of economics and could involve pricing changes that would benefit Universal Music Group.
Exane BNP Paribas believes that the recent reset in expectations presents an attractive opportunity for investors to engage with Universal Music Group's stock. The revised price target of €27.50 reflects this optimism and the anticipated upside that could arise from the evolving landscape of the music streaming industry.
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