UMG Stock Rises on Record Earnings & Layoffs, Sphere Makes Big Gains Following CEO Share Trades

Universal Music Group (UMG) shares rose 4.9% on Thursday (Feb. 29), the day after its fourth-quarter earnings revealed record revenue of 11.1 billion euros ($12 billion) in 2023 and strong subscription-related growth in the fourth quarter. The music giant’s stock finished the week up 2.3% to 27.87 euros ($30.25), bringing its year-to-date gain to 6.8%.

Investors also received details about the financial impacts of UMG’s company-wide layoffs. A reduction in global headcount is expected to save 75 million euros ($81.3 million) in 2024, 125 million euros ($135.5 million) in 2025 and 250 million euros ($271 million) annually by 2026. UMG has not specified the number of employees being laid off, but Billboard had identified nearly 50 across the company by Friday afternoon (Mar. 1). A second phase of layoffs and “other operational efficiencies” is scheduled to begin in 2025 and run through 2026, according to UMG’s latest investor presentation. 

In reducing its headcount and eliminating some positions, UMG is “redesigning our organization to enhance our capabilities in the areas most critical to our future growth and success,” CFO Boyd Muir said during the earnings call Wednesday (Feb. 28). “These changes will strengthen our leadership team, foster innovation and create significant efficiencies across our business.”

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Also enjoying gains this week were some of the other largest companies in the 20-member Billboard Global Music Index. Spotify rose 3.0% to $263.75, Warner Music Group improved 3.2% to $35.48 and Live Nation increased 1.9% to $97.15. The index itself rose 1.9% to a record 1,715.81, with 11 stocks in positive territory.

Stocks had another strong week in the United States overall. On Friday, the Nasdaq composite surpassed its previous high from 2021 and finished the week up 1.7% to 16,274.94. Chipmaker Nvidia rose another 4.4% to $822.79 this week after gaining 8.5% the previous week. Meta shares were up 3.8% to $502.30 following its announcement on Thursday that it will “deprecate” (i.e. remove) its Facebook News tab in the United States and Australia. The S&P 500 gained 0.9% to 5,137.08 — its first close over 5,100. 

In the United Kingdom, the FTSE 100 fell 0.3% to 7,682.50. South Korea’s KOSPI Composite index fell 0.9% to 2,642.36, mirroring the declines of K-pop companies HYBE (down 7.6%), SM Entertainment (down 2.5%), JYP Entertainment (down 3.4%) and YG Entertainment (down 3.9%). China’s Shangai Composite Index gained 0.7% to 3,027.02.

Sphere Entertainment Co. was music’s greatest gainer of the week after its share price rose 8.4% to $44.29. The price jumped 6.2% on Thursday after an SEC filing revealed chairman/CEO James Dolan acquired an additional 59,000 shares, ranging from $40.48 to $41.46 per share. Less impactful to the share price was TMZ‘s news that the Eagles are in talks for a fall residency at the $2.3 billion Sphere in Las Vegas. After U2’s residency ends this weekend, Sphere will host Phish for four dates in April and Dead & Company for 24 dates spanning from May 16 to July 13. Sphere shares have gained 30.3% year to date.

French music streamer Deezer was the next-best performer of the week after gaining 5.1% to 2.25 euros ($2.44). The company reported fourth-quarter earnings on Thursday that showed improvements in subscriber court and average revenue per user. Revenue of 130.7 million euros ($141 million) was up 12.1% from the prior-year period. The same day, Deezer also announced the departure of CEO Jeronimo Folgueira. “Deezer is back on a growth trajectory and can now build from a solid foundation,” said chairwoman Iris Knobloch

Believe shares rose 4.2% to 15.50 euros ($16.82) after the French music company announced that it received interest from a third party; a consortium consisting of founder Denis Ladegaillerie and two major shareholders launched a bid in February to take the company private at 15.00 euros per share. On Friday, Believe revealed it received “a confidential exploratory non-binding approach” from another party that valued the company at “at least” 17.00 euros ($18.45) per share. Believe was careful to note the third party’s approach did not constitute an obligation to make an offer. Still, the appearance of another possible bidder was enough to push Believe’s share price above the consortium’s earlier 15.00 euros-per-share bid.

Shares of Chinese music streamer Cloud Music dropped 0.5% to 90.45 HKD ($11.55). The company announced Thursday that music subscribers grew 8.7% to 205.9 million in the fourth quarter, with subscription growth helping revenue from online music services increase 17.6% to 4.4 billion RMB ($611 million) — although total revenue fell 12.5% to 7.78 billion RMB ($1.09 billion). Gross profit improved 63% to 2.1 billion RMB ($292 million) and net profit improved to 818.5 million RMB ($114 million) from a net loss of 114.6 million RMB ($16 million) in 2022.

iHeartMedia shares fell 2.6% to $2.26 after a seesaw week for the country’s leading radio broadcaster. The stock rose 22.0% to $2.77 on Thursday after the company’s fourth-quarter earnings report suggested the fog might be lifting from an advertising slowdown that has hurt broadcast radio revenues. After fourth-quarter revenue fell about 5%, iHeartMedia’s first-quarter revenue is expected to be down 2% to flat. Podcasts were a bright spot, growing 16.6% in the fourth quarter and 13.8% for the full year. Nearly all of Thursday’s gain was erased on Friday, however, when iHeartMedia shares fell 18.4%.  

Cumulus Media suffered the largest loss amongst music stocks after falling 20.4% to $3.74. On Tuesday (Feb. 27), the radio broadcaster said its 2023 revenues fell 11.4% to $844.5 million and announced a debt exchange offer that would allow lenders to swap 6.750% notes due 2026 for 8.750% notes due 2029. The company is also offering to exchange term loans under a 2019 credit facility for new term loans.

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