The music industry continues to evolve and be disrupted by technology. It also remains a leading part of the broader entertainment industry. So, while music stocks are often overlooked, the space is a good one to hunt for investment opportunities.
In the first three quarters of 2022, music industry revenue, which includes live concerts, streaming, publishing rights and record label earnings, totaled $49 billion, according to MIDiA Research. That was up nearly 50% from $32.9 billion in the same period in 2021. Live music and concerts, in particular, have come stampeding back after the pandemic, while streaming demand remains robust.
Here are three music stocks that are sitting in the sweet spot and poised to rally.
Spotify Technology (SPOT)
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Spotify Technology (NYSE:SPOT) is the undisputed king of audio and music streaming with a 30.5% global share of music streaming subscribers. Second-place Apple (NASDAQ:AAPL) Music has a 13.7% market share.
Spotify ended 2022 with 205 million paid subscribers after adding 10 million in the fourth quarter. This was up 14% year over year and better than analysts were expecting. Meanwhile, total monthly active users on Spotify (paid and free) is fast approaching 500 million people worldwide. While the company remains unprofitable, its Q4 revenue grew 18% from a year earlier.
Investors seem willing to look past the red ink as Spotify continues to expand rapidly. SPOT stock is up 68% year to date and more than 90% since bottoming out in November.
Warner Music Group (WMG)
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While its share price has not risen as much as Spotify, Warner Music Group (NASDAQ:WMG) has still enjoyed a nice bounce, up 38% over the past six months.
Warner Music is the third-largest record label in the world. It represents dozens of big-name artists and bands including Ed Sheeran, Beyonce, Bruno Mars, Cardi B and the Zac Brown Band.
Warner Music struggled during the pandemic, particularly as concerts and live events were canceled. But its 2022 earnings results were solid, beating expectations. Revenue rose 12% year over year to $5.92 billion, while its net income jumped 84% to $551 million.
Live Nation Entertainment (LYV)
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Investors looking for a buy-the-dip opportunity in music stocks should consider Live Nation Entertainment (NYSE:LYV). Formed in 2010 through a merger of Live Nation and Ticketmaster, the company promotes and manages ticket sales for live music concerts throughout the world.
With the global concert industry shutdown during the pandemic, LYV stock was hit hard. But shares rebounded sharply before topping out in early 2020 above $123. Today, LYV sits 44% below that high, while it is roughly flat on a year-to-date basis.
Live Nation has gotten some bad publicity recently in the form of public spats with musicians and their fans. Notably, a bruhaha erupted last year around the sale of concert tickets for a Taylor Swift tour.
What makes LYV stock an attractive option, though, is that the company has a virtual monopoly over its industry, controlling an estimated 70% of the ticketing and live event venues market. That puts a wide moat around the stock.
On the date of publication, Joel Baglole held a long position in AAPL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.