One Solid Earnings Report Later, Spotify’s Market Cap Is Now $23 Billion Larger Than Universal Music’s

With Spotify stock (NYSE: SPOT) riding high – and with Universal Music shares struggling – the streaming giant’s market cap is now about $23 billion larger than that of today’s biggest music company.

The sizable valuation discrepancy was set in motion this week, when Spotify posted solid Q2 operating income and (despite missing MAUs guidance) subscriber growth. As we reported, SPOT subsequently cracked a year-to-date high.

Inversely, Universal Music Group shares tumbled in the aftermath of the company’s own Q2 financials release. The report didn’t contain any particularly groundbreaking information, but overall revenue spiked 8.7% YoY and recorded music subscription streaming revenue grew 6.5% YoY.

As execs acknowledged during the corresponding earnings call, however, the streaming growth rate slowed from Q2 2023 (10.6% YoY) and 2023’s opening half (11.6% YoY). Additionally, ad-supported streaming revenue slipped 4.2% YoY during Q2 2024, UMG noted.

While it perhaps goes without saying in light of UMG shares’ double-digit valuation decrease, the developments seemingly left a negative impression on investors. At the time of writing, Universal Music stock (UMG on the Euronext Amsterdam) was down 3.6% on the day at €21.34 per share.

The price marks a 24.2% falloff from Monday morning and reflects a market cap of €39.04 billion, or just shy of $42.4 billion at the present exchange rate. Though that’s hardly anything to scoff at, the market cap is, of course, also down close to a quarter from the week’s beginning.

On the other hand, SPOT was flying high at $324.57 at the time of writing, down slightly on the day (and down more than that from a YTD high of $346.23 on Wednesday) for a $65.2 billion or so market cap.

That the discrepancy between those valuations is significant goes without saying. But market cap is only one way to measure a company’s worth, and emotion as well as potentially irrational enthusiasm are far more effective than logic and math at driving stock-price growth.

To be sure, even SPOT’s latest jump hasn’t quite brought the price back to where it stood in February of 2021, after the May of 2020 announcement of an initial Joe Rogan Experience deal. Several analysts helped fuel that upward trend with aggressive target prices in excess of $400; the following year, shares declined to around $70 apiece.

Shifting the focus to the entities’ respective positioning, Spotify is a hot tech company that’s achieving profitability and has made clear plans to remain in the black moving forward. In short, the market could be placing a premium on consistency against the backdrop of an uncertain economy.

Meanwhile, Euronext-traded Universal Music is the lesser-known business despite serving as the professional home of commercially prominent acts like Taylor Swift, Billie Eilish, Morgan Wallen, Drake, and a multitude of others.

Ironically, UMG possesses a number of high-value assets and agreements that Spotify lacks and (notwithstanding ongoing diversification efforts) relies on. To say Swifties would be up in arms if Swift’s work was pulled from the service is an understatement. But at least for now, investors are evidently more optimistic about the direction of Spotify than the direction of the company that provides a substantial portion of the platform’s most popular content.