Does your portfolio play beautiful music for you? Or is it more like the blues? The music industry brings in millions of dollars every year, but that doesn’t necessarily make it an investment worth singing about.
The music industry is highly reliant on the economy thriving and on sales from a public that is changing the way it listens to and buys music. Investments in this industry can truly be just like a newly released song – hit or miss.
Let’s take a look at some music related stocks and see if they can play a pleasant tune for young investors.
Sirius Satellite Radio Inc. (SIRI)
Snapshot: The future home of "The Howard Stern Show"; in 2006 aims to bring satellite broadcasts of radio stations to every car on the block.
Recent Price: $7.10
- Recently inked a deal for factory installation by Ford in 21 vehicle lines by this summer.
- Partnering with Microsoft to provide a video service that will offer children’s programming along with its satellite radio format.
- Sirius saw a nearly four-fold jump in subscribers during the past year alone – from 261,000 to more than 1.1 million. This number could rise significantly higher in the next year, as media mogul Mel Karmazin takes over as CEO.
- Despite the jump in subscriptions, Sirius still trails rival XM Satellite Radio by more than 2.1 million paying customers.
- The stock is not cheap despite its low price, as it trades for a dizzying 203 times sales and a lofty eight times book value.
- Company is expected to report a loss of 52 cents per share for 2004, with projections of a 47 cent per share loss for 2005. The big question is how long can Sirius sustain these kinds of losses before the market catches up with it?
EMI Group plc (EMIPY)
Snapshot: The British-owned music recording and publishing company has more than 1,000 artists in its stable, including bestsellers Eminem, Usher and Norah Jones, as well as superstars, such as Janet Jackson and Paul McCartney.
Recent Price: $9.65
- Powerhouse stable of recording artists that dominates sales in the music industry.
- Potentially undervalued as EMI trades for just 13 times earnings projected earnings and one times sales.
- Should get a nice boost in sales following February’s Grammy Awards, thanks to a laundry list of EMI artists with nominations.
- Company is very much like a retail stock, with much of its sales and big releases coming during the holiday season.
- A chart-busting amount of debt on the books – to the tune of $2.1 billion, as compared to just $287 million in cash on hand.
- Since EMI is based in London, only one analyst covers the stock, leaving future earnings growth a bigger question mark than most stocks.
Clear Channel Communications Inc. (CCU)
Snapshot: The dominant player in the radio broadcasting market, Clear Channel Communications owns 1,182 radio stations nationwide, but the company is also active in outdoor advertising and live entertainment.
Recent Price: $31.89
- Earnings are projected to jump 19% in the next fiscal year to $1.56 per share.
- Clear Channel clearly brings in the dough, with estimated 2004 revenues of $9.46 billion and estimates to grow sales to $9.7 billion for 2005.
- Shares are trading near a 52-week low, which might make it an attractive investment to new buyers.
- Even with it shares trading near a year low, Clear Channel’s stock is still trading at 23 times earnings, not exactly cheap.
- Despite the fact that the company earned a hefty $818 million in the past year, the radio advertising industry remains in the doldrums.
- The concert-going industry – an important business for Clear Channel – just experienced a dismal year for ticket sales. Things were so bad that last summer, Clear Channel was forced to slash ticket prices for a number of its shows.
Michael Abramowitz is a freelance writer based in Florida. To avoid a conflict of interest, he does not currently own any of the stocks mentioned above.
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