We recently compiled a list of the 8 Best Music Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where Warner Music Group Corp. (NASDAQ:WMG) stands against the other Best Music Stocks to Buy According to Hedge Funds.
The Global Music Industry Continues to Grow
According to a report by IFPI, the global recorded music market was worth $28.6 billion in 2023 and witnessed the ninth year of consecutive growth. It represented a diverse and global industry that saw revenues grow in every region and across virtually all recorded music formats with the exception of downloads and other (non-streaming) digital formats.
The global recorded music revenues grew by 10.2% in 2023, largely due to the growth in paid streaming subscribers. Streaming continued its domination of global revenues. Streaming revenues made up the majority of revenue growth and total share of the market. Subscription streaming revenues solely increased by 11.2% and accounted for almost half of the global market. 2023 was also the year when the paid subscriptions to music streaming services exceeded 500 million for the first time.
Region-wise, USA & Canada held the largest share of global recorded music revenues, experiencing a growth of 7.4% in 2023. Revenue grew by 7.2% in the USA, the single largest recorded music market globally, and by 12.2% in Canada. Simultaneously, Europe represented more than a quarter of global revenues with its revenue growth of 8.9%. Asia had a revenue growth of 14.9%, underpinned by a healthy growth in its major markets of Japan and China.
What’s Happening in the Music Streaming Space?
In an era of growing music streaming as aforementioned, Spotify is expected to continue its dominance. Todd Gordon, Inside Edge Capital founder, joined CNBC to discuss the potential growth of the firm. The stock is currently hanging just below its record highs. In his opinion, it looks great with its year-over-year ‘insane’ earnings growth, the generation of substantial free cash flow, subscriber growth, and the company winning the music streaming war against rivals. Thus, the firm is big in music with other competitors which do not seem quite as robust.
The music streaming space is about to see one less player as TikTok has decided to shut down its music streaming business in November after an experiment of directly competing with the industry giants for just over a year. In July 2023, TikTok launched its music streaming service in Indonesia and Brazil before it rolled out in Australia, Mexico, and Singapore. Data from MIDiA Research revealed that TikTok is the second-most common source of music discovery for those aged 16 to 19, following YouTube.
Although the service was perceived as a low risk to premium incumbent platforms since they have strong brand loyalty, TikTok’s large installed base of users presented it an opportunity to convert them into paying TikTok Music subscribers. However, the firm is now focusing its resources on its ‘Add to Music App’ feature which enables users to save music tracks they discover on TikTok to playlists on partner services. Regarding the move, the global head of music business development, Ole Obermann stated:
“Our Add to Music App feature has already enabled hundreds of millions of track saves to playlists on partner music streaming services”
Now that we have discussed the music industry dynamics, let’s move to the 8 best music stocks to buy according to hedge funds.
Our Methodology
In order to compile a list of the 8 best music stocks to buy according to hedge funds, we sifted through stock screeners, ETFs, and online rankings to create an extensive list of players in the music industry. Moving on, we shortlisted the top 8 stocks from our list which had the highest number of hedge fund holders. The 8 best music stocks to buy according to hedge funds have been arranged in ascending order of their hedge fund holders as of Q2 2024. It is important to note that we have included only pure-play music stocks.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Warner Music Group Corp. (NASDAQ:WMG)
Number of Hedge Fund Holders: 30
Warner Music Group Corp. (NASDAQ:WMG) is a global music entertainment company across recorded music, music publishing, and artist services. It operates through the Recorded Music and Music Publishing segments. The firm operates in more than 70 countries around the world.
The company is home to an unparalleled family of creative artists, songwriters, and companies with its legacy going back over 200 years. The firm’s Recorded Music arm encompasses many of the world’s most visionary artists and labels, with a rich catalog boasting some of the most influential recordings in music history. This division includes renowned labels such as 10K Projects, Asylum, Atlantic, Elektra, Warner Records, Warner Classics, and Warner Music Nashville.
Additionally, Warner Chappell Music, WMG’s music publishing arm, publishes and administers genre-spanning music while representing the work of some of the most legendary composers in the industry. It has a catalog of more than one million copyrights spanning every musical genre. Furthermore, the firm’s network of brands and entertainment destinations uniquely positions it as a media and culture powerhouse.
The firm witnessed strong Recorded Music subscription streaming growth driven by a robust slate and healthy industry trends in its third quarter. It also demonstrated continued momentum in Music Publishing driven by strength in Digital and Performance. Operating income rose 10% to $207 million as compared to $189 million in the prior-year quarter while cash provided by operating activities increased to $188 million relative to $146 million in the prior-year quarter. Commenting on the bright prospects for the firm, Bryan Castellani, CFO, of Warner Music Group, stated:
“Our Q3 results were highlighted by strong margin expansion and operating cash flow growth, reflecting robust streaming performance and disciplined cost management. Looking ahead, we are focused on delivering a strong close to the year. The industry remains healthy and we continue to position ourselves for long-term success.”
Warner Music Group Corp. (NASDAQ:WMG) is one of the best music stocks to buy. The company efficiently brings together songwriters, artists, entrepreneurs, and technology moving entertainment culture across the world while having a dominant position in the music arena.
Overall, WMG ranks 4th on our list of the other Best Music Stocks to Buy According to Hedge Funds. While we acknowledge the potential of WMG as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than WMG, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
