Universal Music Group’s Santa Monica operational headquarters. Photo Credit: Coolcaesar
Universal Music Group (UMG) has officially kicked off another share buyback program by repurchasing nearly $60 million worth of its own stock.
UMG shed light on this latest multimillion-dollar transaction today, just weeks after confirming that it’d deployed €500 million (currently $577 million) for the same purpose since March. But thus far, the aggressive strategy hasn’t ushered in a valuation spike. In fact, Universal Music stock is down substantially on the year and approximately 40% from around the time of the company’s 2021 IPO.
As such, the major last week noted “the start of its additional share buyback program,” complete with a $289 million/€250 million tranche. And as underscored in the same release, the disclosure didn’t arrive out of the blue; in late April, while fending off a Pershing takeover attempt, Universal Music acknowledged the expanded capital commitment.
Furthermore, higher-ups indicated that UMG would cash in on a portion of its Spotify stock – once again a byproduct of the clash with Pershing, which intended to sell the entire stake – and direct the proceeds “towards its buyback program.”
Back to the latest release, then, Universal Music between August 6th and 7th scooped up nearly 3.35 million of its shares at an average of $17.73/€15.36 a pop, for a total of $59.36 million/€51.43 million.
The transaction and the overarching buyback program have yet to fuel a price boost; UMG finished at $17.58/€15.23 today, down 2.6% from open. Needless to say, the situation raises a number of pressing questions – including about why shares are worth roughly half as much as they were at their peak.
We could explore likely answers in detail if so inclined. At the top level, Universal Music’s seemingly solid fundamentals aside, accelerated subscription growth, a lucrative AI deal or two, and fresh revenue streams from music-adjacent verticals stand out as steps to potentially right the stock-value ship.
From the perspective of determining UMG’s path forward, this breakdown might prove more useful (or at least likelier to produce concrete takeaways) than consulting analysts’ ratings.
Above-described tumble aside, some new forecasts are decidedly bullish; Morgan Stanley recently opted for a buy rating and a $28.86/€25 UMG target price, for instance, against a whopping $45.01/€39 target from J.P. Morgan.
But those aligned assessments don’t reflect a consensus. In the middle of the pack, Guggenheim is banking on Universal Music stock’s improving slightly to $23.08/€20 per share – meaning beneath its immediate post-IPO positioning half a decade ago.
And Goldman Sachs, for its part, expects Universal Music to hold steady at $17.31/€15 per share, or right around where it’s currently sitting. Admittedly, the relatively bearish outlook concerning the world’s largest music company is curious when considered alongside years of pie-in-the-sky assessments from Goldman’s “Music in the Air” report.
In any event, it appears safe to say that investors aren’t on the same page when it comes to where UMG is heading from here, and it’ll be worth closely monitoring the stock’s trajectory as well as the buyback program’s progress.
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