* Q3 results below consensus but strong trends at UMG
* Selling a minority stake in UMG is an option -CEO
* Independent analyst values UMG at $21 billion
* Shares up 4.4 pct (Adds context, updates shares)
BARCELONA/LONDON, Nov 17 (Reuters) - Vivendi's Universal Music Group (UMG) could be worth more than $40 billion, Chief Executive Arnaud de Puyfontaine said on Friday, helping to buoy shares in the French media group after third-quarter results in which UMG was a highlight.
Vivendi has floated the idea that UMG, the world's biggest music label, could be ripe for a stock market listing, boosting the group's shares in recent months amid concerns about its investments in Italy.
Shares in Vivendi rose 4.4 percent on Friday.
Strong trends in UMG and signs of recovery at Vivendi's Canal Plus unit helped to offset overall third-quarter results that fell short of analyst forecasts on Thursday.
Asked about UMG's valuation at the Morgan Stanley European Technology, Media and Telecoms conference in Barcelona, de Puyfontaine said he had seen an estimate this week that valued the division at $40 billion.
"I wouldn't put a number, but I think that number is higher than the highest one that is currently expressed by the markets," he said. When asked if he thought UMG was worth more than $40 billion, he said: "yes."
However, it has proven hard to put valuations on music businesses in an industry that has been transformed by the consumer shift from purchases to streaming, and with listeners in emerging markets yet to embrace the new business model.
It has always been difficult to eke out big profits in the sector, with many customers still unwilling to pay much for songs they can hear free on the radio, in music blogs or on free apps.
In April Vivendi General Counsel Frederic Crepin had said estimates given by banks proposing a listing for UMG had valued the business at up to 20 billion euros.
While UMG has significant growth potential as the leading player in a market dominated by three global music labels which pocket the largest part of streaming revenues, Louis Citroen, an analyst at independent firm Arete Research, said he currently valued the business at 18 billion euros ($21 billion).
The rising value of UMG - which has a partnership with music streaming business Spotify - has also fueled speculation that Vivendi, chaired and controlled by billionaire Vincent Bollore, could sell a minority stake of the music division.
"This is an option," de Puyfontaine said when asked about it. "We are not pro-actively working on that option," he added.
Vivendi has built up stakes in Telecom Italia, MediaSet and video games group Ubisoft, and it bought advertiser Havas this year.
Its shares are up by around 20 percent in 2017, outperforming a 6 percent decline on the STOXX Europe Media & Publishing index.
UMG's core operating profit jumped 25.5 percent, excluding currency moves, acquisitions and disposals, in the first nine months of the year to 442 million euros ($521 million), helped by rising revenues.
But that might not be enough in itself to justify such high valuations, said Mark Mulligan, a senior music analyst at MIDIA.
"The traditional ways of valuing record labels are becoming less useful," he said. "Especially the value of catalog which is becoming less valuable as we are moving away from the age of greatest hits albums and classic album re-releases."
Interest in a potential UMG flotation comes as investors as trying to gauge the main beneficiaries of the digitalisation of music products: distributors such as Spotify, or rights owners such as UMG.
Spotify is gearing up to file for an initial public offering (IPO) late this year in order to float in the first quarter of 2018, sources have told Reuters.
The listing would value the platform at $16-$20 billion, sources said in September.
($1 = 0.8482 euros) (Additional reporting by Sophie Sassard in London; Editing by Sarah White, Mark Potter and David Goodman)