BUZZ-UMG is JPM's 'highest conviction idea' with scope to double its value in 2-3 years

Reuters01-17

BUZZ-UMG is JPM's 'highest conviction idea' with scope to double its value in 2-3 years

** J.P.Morgan says UMG is its "highest conviction idea", seeing it possible for the Amsterdam-listed music label to double its value over the next 2-3 years

** "UMG is 10 years into a 30-year growth story driven by streaming and subscriptions," JPM says, highlighting UMG's catalogue visibility, high single-digit organic growth and mid-double-digit earnings growth

** JPM upholds its "overweight" rating and PT of 36 euro, saying P/E of x30 can be maintained for a "decade or more" given the scope of growth in market penetration and average revenue per user

** "We view UMG as an extraordinary, 'must-own' asset," the analysts say, arguing UMG is best placed to capitalise on trends within streaming industry, given its share of the catalogue and position of "partner of choice" for artists trying to maximise their probability of success and monetisation

** At the moment the stock is trading "only" at P/E of x21 because of still evolving algorithm growth and misplaced concerns over "balance of power" between content owners and distributors after Spotify's SPOT.N 2024 gross margin expansion, JPM says

** At 0838 GMT the stock is up 1.1%, paring gains after reaching a two-week high and outperforming the pan-European STOXX 600 index .STOXX

(Reporting by Mateusz Rabiega and Piotr Lipinski in Gdansk)

((Mateusz.rabiega@thomsonreuters.com;))

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