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Universal Music Shares Plunged 24% After Quarterly Earnings Revealed Subscription Growth Slowdown

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Universal Music's stock dropped 24% after its earnings report release on Wednesday, which showed a slowdown in streaming subscription growth.

Slowing growth in subscription streaming sent Universal Music Group’s share price down 23.5% following the company’sOn Thursday , UMG shares dropped as far as 19.93 euros , 29.8% below Wednesday’s closing price, before closing at 21.70 euros – a 23.5% decline that erased 12.2 billion euros from UMG’s market capitalization. Investors were reacting to a marked slowdown in streaming revenue in UMG’s recorded music division: In the second quarter, music subscription revenue grew 6.9%.

Despite the streaming slowdown, UMG managed to improve both top-line revenue and margins. Overall revenue grew 8.7% to 2.93 billion euros . As a percentage of revenue, adjusted earnings before interest, taxes, depreciation and amortization improved to 22.1% from 21.9% in the prior-year period. Physical music sales grew 14.4% and merchandise sales jumped 43.7%.

Many analysts lowered their price targets following Wednesday’s results, albeit by smaller margins than investors dropped the share price on Thursday. Guggenheim dropped UMG by 14% to 27.50 euros . Barclays lowered its price target by 12% to 26.00 euros . Citi lowered UMG by 7.8% to 29.50 euros . And Kepler Cheuvreux reduced its price target 3.5% to 27.00 euros .

 

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