Universal Music Earnings: Benefits From Streaming for Universal Music Are Increasing

Universal Music continued its impressive top-line growth and adjusted EBITDA margin expansion in the third quarter. Top-line growth was driven mainly by an increase in recorded music and music publishing revenue, in constant currency. Revenue growth also created operating leverage, which more than offset the impact of a mix-shift toward lower-margin merchandise revenue and expanded adjusted EBITDA margin impressively. The growth is likely to accelerate in the fourth quarter and the first half of 2024 due to the price increase implemented by the music streaming providers. We did not make significant adjustments to our model and are maintaining our EUR 31 fair value estimate on the shares of narrow-moat Universal Music, which remain undervalued.