As the global epidemic continues to spread and governments in countries all over the world urge people to stay home and self isolate, we’ve seen the stock markets take a giant hit. Whilst we see many that are quite expected, we’ve also seen a drop in share prices for many that previously could have been considered quite safe.
There is a unique opportunity presented here, however. Lower offering prices mean a lower entry point, and there is a strong case to be had, that those businesses whom have seen their share price fall, are only suffering from the short-term market uncertainty that we’re seeing at the moment. Industries that likely will always remain solid, but are dipping in-line with market drops, remain a solid investment choice for those experienced in the game – as the risk of them remaining below market cap for a long period is extremely slim.
Spotify – the online streaming giant is amongst one of the many music facing companies that have suffered a big loss, if not one of the more surprising. As with many online content services, the expectation being that as many face extended periods of time at home away from work, we’d see a big increase in use of digital services. And whilst that has been the case for a lucky few, such as the biggest video streaming service, Netflix, seeing a rising share, Spotify has become one of the many to suffer seeing it’s biggest losses since October 2019 when their competitor, Apple Music, launched their new and improved platform.
Whilst their pre-market price is up by 4.81% (at the time of writing), their share price has dropped quite substantially through the course of March, as market uncertainty reaches its peak levels. Of course, investment of any nature needs to be considered carefully, with both risk management and market psychology at the forefront of any decisions made – but a music streaming service seems an interesting choice, especially given the future-proofed nature of its offering. The exchange rates have a direct correlation to share prices, with the FTSE 100 rising as the pound falls – typically because over 72% of the FTSE 100 comapnies generate their revenues from overseas. As such, given the market uncertainty we’re currently facing, shares in Spotify, and indeed music in general, seem to be only in a short term decline, and the bigger picture should be sought. The music streaming service will likely attract the younger generation, many of whom may be new to investing and are in the process of learning. One things for sure, however – with the element of uncertainty, also comes an element of opportunity.
Live Nation – The owner of Ticketmaster and a huge concert promoter, Live Nation may be one of the more expected casualties as “social distancing” is being urged as the norm. As music artists are asked to cancel their events and big arena’s face short term closure, there is understandably a small panic for a company who rely on ticket sales as their core business. The entertainment company hit a low share price on March 18th of $29.50, it’s lowest since March 2017. In a similar note, rivals Eventbrite were another ticketing company that saw a massive drop in share price, reaching their lowest since the company went public.
Vivendi – The corporation that is the majority owner of Universal Music Group – who represents popular superstars such as Taylor Swift, Lady Gaga, and Kanye West – also faced some big losses. Whilst also experiencing their biggest loss since 2017, Vivendi have since bounced back in recent days and seem to be stabilising a little after their initial loss.
With seemingly a long time to go before we see a return to some level of normalcy, we could see these companies struggle for some time to come. One giant who did manage to come out completely unscathed however, was the Warner Music Group. Home to artists such as Ed Sheeran and Camila Cabello – the music giant put forward a freeze on its public offering prior to the outbreak, which may have been frustrating to the shareholders invested, but may now look like a genius move as they appear to have been able to avoid the worst of it.
The key to look at here however is that despite appearances of industry safety, unique events like this that may only ever rarely occur can have a profound effect. We will no doubt see a speedy recovery as we have mentioned is already happening in some cases, but now the question will fall to how do the music companies handle this transitioning period and then when all is said and done and the air is clear once more, how do they prepare for something like this possibly happening again.