Music is many things—a throwback, an occupation, a delight, an aphrodisiac—and among those things is money. Yes, music is money to people’s ears, or money is music to people’s ears. However you want to phrase it, investors love music. Why? Because the services that support music are huge.
Let’s take a look at the five music stocks that have investors talking and that you should consider adding to your portfolio.
1. Spotify (NYSE)
Spotify, founded in 2006, is a popular music streaming service headquartered in Stockholm, Sweden. It has since expanded to most of Europe, Oceania, all over the Americas, and over 40 countries in Africa. It is expected that by the end of 2021, Spotify will operate in a total of 178 countries worldwide.
Why it Matters
Spotify makes its revenue through advertising and subscriptions—but mostly advertising. Because of this, the company is looking to increase the amount of advertising revenue it brings in and, therefore, its value. If successful, the earnings it gains could give Spotify a better standing among its competitors.
Still, increasing advertising is a bold step and a potential hit on user experience. Though most likely, membership will not decrease significantly due to this. It could deter people from streaming on the platform casually.
Spotify’s shares on the NYSE are pretty static at present, which is a welcome state compared to earlier this year. At the beginning of 2021, the stock soared to over 165% but soon after lost 40% of its value, making it overvalued. However, the company recovered by repurchasing its shares and is now in a position to grow over the next ten years.
2. Apple (NASDAQ)
Apple is well known in the online music industry and has become one of the most popular streaming and download services globally. Originally founded in 1976, Apple has undergone several name changes, and product revamps.
In 2005, Apple’s shares rose dramatically as it concentrated on tablets and smartphones. Its ability to recognise the early popularity of these ‘must-have’ gadgets really propelled the company forward.
Now, as of 2021, the company is worth over USD 2 trillion. Wow!
Why it Matters
Apple is, without a doubt, one of the best-known names in the computer world. So even if its music streaming platform isn’t the most popular, the company itself has plenty of other things on which to fall back. It has enough revenue through its multi-business ventures that it can absorb any financial losses, which others in the streaming business cannot do.
Shares in Apple are not cheap. Though owning these shares is not impossible, you’ll need to shell out quite a bit of cash. However, once you’re in, you’re in.
Let it be said, though, that Apple shares have recently dipped due to an impending financial crisis in China. Major note, if you’re going to follow Apple stock, you have to know what’s going on in China. Apple, among other big tech companies, relies on Chinese companies for raw materials and manufacturing. If these factories default, it’s going to be an unsightly “flesh wound” for Apple.
3. Sirius XM (NASDAQ)
Sirius XM Holdings was founded in 2008 as a result of the merger of Sirius Satellite Radio and XM Satellite Radio. It is an American broadcasting company based in New York, providing both satellite and online radio services. Sirius XM also holds a 70% share in the Canadian company Sirius XM Canada which offers the same services to Canada.
Why it Matters
A good sign that a company is growing is when it acquires another popular name, especially a direct competitor. In September 2018, Sirius XM purchased Pandora. This made Sirius XM the largest audio entertainment company in North America.
The 12-month forecast for Sirius XM shows a target high of 8.25 and a low of 5.75. These numbers represent a positive 23.23% increase since the last price.
4. Hipgnosis (LSE)
Hipgnosis Song’s Fund, or Hipgnosis, is a British music streaming service founded by producer Merc Mercuriadis and musician Nile Rogers. Both founders realised that the songwriter was not getting the financial recognition and royalties they deserved and found a solution.
By offering an investor pure-play exposure to songs and any associated merchandise, they soon established Hipgnosis Song’s Fund.
Why it Matters
Hipgnosis brings a unique business perspective to music industry investments by redirecting cash flow to the creators of music, not just the labels. Mercuriadis is a champion for songwriters, and a recent investigation into the problematic relationship between music publishers and major labels may end up benefitting his mission.
Hipgnosis has traded on the London Stock Exchange (LSE) since July 2018. By November 2019, Hipgnosis was transferred to the premium segment on the main market, and it has been a consistent performer in the FTSE 250 index since March 2020.
5. Gear4Music Holdings (AIM)
Andrew Wass founded Gear4Music Holdings in 1995 after he had been supplying small recording studios, schools, and colleges with low price, personal computer-based digital recording solutions.
Gear4Music developed further in 2003 as they identified a low price strategy for supplying musical instruments to music stores, schools, and colleges cheaper than the traditional outlets. The company is now based out of York, UK.
Why it Matters
Gear4Music isn’t a flashy streaming or download service, but it has still gained the attention of equity firms and enjoyed growth over the years. In 2013, Key Capital Partners provided funds to develop the company’s website, and the company has now opened distribution centres in Sweden and Germany.
Gear4Music Holdings has been trading on the Alternative Investment Market (AIM) on the London Stock Exchange since 2015. It had a stellar year in 2020, despite the pandemic, and is holding strong.
It is hard to decide which of the five companies is a “better” investment. Each one plays to a certain interest and is in a good position to grow. However, the hierarchy in this category is obvious, with Apple and SiriusXM currently leading the pack.
Still, whatever option you choose, be sure you weigh the risks and think in terms of longevity. Music services are tricky, and as history has shown us, these platforms come and go regularly.