Universal Music Group (ENXTAM:UMG): Exploring Valuation After Dismissal of Drake’s Lawsuit

Universal Music Group (ENXTAM:UMG) was in the headlines after a federal judge dismissed Drake’s defamation lawsuit against the music giant. The court decided Kendrick Lamar’s lyrics were opinions and not factual allegations, in the context of a public feud.

See our latest analysis for Universal Music Group.

Universal Music Group’s legal win arrives amid a rocky patch for its stock, with the share price dropping 6.38% over the past month and a year-to-date decline of 3.45%. However, the underlying business has still delivered a positive 2.2% total shareholder return in the last year and 36.9% over three years, showing that while short-term momentum has cooled, long-term investors have seen solid rewards overall.

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With the legal drama resolved and shares trading below analyst targets, investors are left to wonder if Universal Music Group is trading at a bargain or if the market is already anticipating stronger growth ahead.

Most Popular Narrative: 19.9% Undervalued

Universal Music Group's fair value, according to the most popular narrative, stands at €29.32 which is well above its last close of €23.48. Investors are closely watching whether this gap signals a real bargain or if current market skepticism is justified.

Accelerating adoption of paid music streaming and growing internet penetration in emerging markets like Brazil, Mexico, and China is driving high single-digit subscription revenue growth, with strong momentum in high-ARPU developed markets and double-digit growth in key developing regions. This sets the stage for sustained topline and earnings expansion as global middle-class spending on digital entertainment rises.

Read the complete narrative.

Want to know what's fueling this high valuation? The narrative hints at global shifts in music consumption and a relentless push for recurring digital revenue. Curious what bold financial projections lie behind a price target well above the market? The real story is in the forecasts. Explore for the numbers and the logic driving that fair value.

Result: Fair Value of €29.32 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, ongoing challenges in monetizing short-form content and reliance on superstar artists could quickly undermine these optimistic projections if trends shift unexpectedly.

Find out about the key risks to this Universal Music Group narrative.

Another View: Multiples Suggest Limited Upside

While the analyst consensus values Universal Music Group well above its current share price, a look at its price-to-earnings ratio tells a more cautious story. At 16.5x, the company trades in line with the industry average (16.4x), but above the fair ratio for this business (13.3x). This means the shares could be at risk of moving sideways until earnings catch up. Does the market see something the numbers do not?

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own Universal Music Group Narrative

If you’d rather dig into the numbers and craft your own story, the tools are there for you to build a personal view in just minutes. Do it your way

A great starting point for your Universal Music Group research is our analysis highlighting 3 key rewards and 2 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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