We recently compiled a list of the 8 Best Music Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where Sonos, Inc. (NASDAQ:SONO) stands against the other Best Music Stocks to Buy According to Hedge Funds.
The Global Music Industry Continues to Grow
According to a report by IFPI, the global recorded music market was worth $28.6 billion in 2023 and witnessed the ninth year of consecutive growth. It represented a diverse and global industry that saw revenues grow in every region and across virtually all recorded music formats with the exception of downloads and other (non-streaming) digital formats.
The global recorded music revenues grew by 10.2% in 2023, largely due to the growth in paid streaming subscribers. Streaming continued its domination of global revenues. Streaming revenues made up the majority of revenue growth and total share of the market. Subscription streaming revenues solely increased by 11.2% and accounted for almost half of the global market. 2023 was also the year when the paid subscriptions to music streaming services exceeded 500 million for the first time.
Region-wise, USA & Canada held the largest share of global recorded music revenues, experiencing a growth of 7.4% in 2023. Revenue grew by 7.2% in the USA, the single largest recorded music market globally, and by 12.2% in Canada. Simultaneously, Europe represented more than a quarter of global revenues with its revenue growth of 8.9%. Asia had a revenue growth of 14.9%, underpinned by a healthy growth in its major markets of Japan and China.
What’s Happening in the Music Streaming Space?
In an era of growing music streaming as aforementioned, Spotify is expected to continue its dominance. Todd Gordon, Inside Edge Capital founder, joined CNBC to discuss the potential growth of the firm. The stock is currently hanging just below its record highs. In his opinion, it looks great with its year-over-year ‘insane’ earnings growth, the generation of substantial free cash flow, subscriber growth, and the company winning the music streaming war against rivals. Thus, the firm is big in music with other competitors which do not seem quite as robust.
The music streaming space is about to see one less player as TikTok has decided to shut down its music streaming business in November after an experiment of directly competing with the industry giants for just over a year. In July 2023, TikTok launched its music streaming service in Indonesia and Brazil before it rolled out in Australia, Mexico, and Singapore. Data from MIDiA Research revealed that TikTok is the second-most common source of music discovery for those aged 16 to 19, following YouTube.
Although the service was perceived as a low risk to premium incumbent platforms since they have strong brand loyalty, TikTok’s large installed base of users presented it an opportunity to convert them into paying TikTok Music subscribers. However, the firm is now focusing its resources on its ‘Add to Music App’ feature which enables users to save music tracks they discover on TikTok to playlists on partner services. Regarding the move, the global head of music business development, Ole Obermann stated:
“Our Add to Music App feature has already enabled hundreds of millions of track saves to playlists on partner music streaming services”
Now that we have discussed the music industry dynamics, let’s move to the 8 best music stocks to buy according to hedge funds.
Our Methodology
In order to compile a list of the 8 best music stocks to buy according to hedge funds, we sifted through stock screeners, ETFs, and online rankings to create an extensive list of players in the music industry. Moving on, we shortlisted the top 8 stocks from our list which had the highest number of hedge fund holders. The 8 best music stocks to buy according to hedge funds have been arranged in ascending order of their hedge fund holders as of Q2 2024. It is important to note that we have included only pure-play music stocks.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Sonos, Inc. (NASDAQ:SONO)
Number of Hedge Fund Holders: 20
Sonos, Inc. (NASDAQ:SONO) revolutionizes how people listen and connect to sound. In a period where nobody had heard of music streaming, the firm’s founders came up with the mission of bringing music to every home, wirelessly, in multiple rooms, from PCs and the Internet, with good sound. The company was founded in 2002. The firm offers effortless listening with its wide variety of products. Users can have access to expertly curated music stations, original shows, and over 60,000 broadcast channels globally from Sonos Radio.
While Sonos introduced the world to multi-room music over 20 years ago, it plays in over 15 million homes. In April, the firm revealed its most extensive app redesign ever. The firm enabled listeners to organize their favorite playlists, stations, albums, and more from over 100 services on one customizable Home screen for an unparalleled streaming experience. Commenting on the major development, Maxime Bouvat-Merlin, Chief Product Officer of Sonos, stated:
“As the only audio brand with an open platform offering extensive choice, Sonos makes it easy to control your system and curate your favorite sounds all in one place. Our reimagined app delivers the industry’s most streamlined streaming experience by bringing a world of content and intuitive control to the Home screen.”
For Q3, Sonos, Inc. (NASDAQ:SONO) recorded revenue of $397.1 million, up 6% year-over-year. Although there were problems with the firm’s new app which was introduced in May, the CEO referred to the unfortunate event as ‘one chapter in our over twenty years of delighting customers’ and is hopeful of fixing the issues as the top priority. These problems include missing features and bugs as reported by customers.
Sonos, Inc. (NASDAQ:SONO) is well known for its unparalleled sound experience, simplicity of use, thoughtful design aesthetic, and an open platform. With a large addressable market, the firm has a lot of room to grow and improve.
Overall, SONO ranks 6th on our list of the other Best Music Stocks to Buy According to Hedge Funds. While we acknowledge the potential of SONO as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than SONO, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.