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Investing.com - Bernstein SocGen Group has raised its price target on Warner Music Group (NASDAQ:WMG) to $34.00 from $32.00 while maintaining an Outperform rating ahead of the company’s third-quarter 2025 earnings report. According to InvestingPro data, the stock has shown significant momentum with a 9.59% return over the past week, though it currently trades at a relatively high P/E multiple of 34x.
The firm expects Warner Music to report results in line with consensus expectations in early August, though it notes a potential wild card from a recently announced legal settlement with cable operator Frontier that could boost adjusted OIBDA and earnings. With 41 days until the next earnings release on August 12, 2025, InvestingPro analysis shows the company maintains a GOOD overall financial health score, suggesting strong operational fundamentals.
Bernstein’s focus has shifted to Warner Music’s fiscal 2026 earnings growth potential, particularly regarding timing of subscriber minimum escalators in licensing agreements with major digital service providers, the pace of cost reductions, and deployment of $1.2 billion toward catalog purchases through a joint venture with Bain Capital. The company has demonstrated consistent profitability with a gross margin of 46.8% in the last twelve months, while maintaining a healthy dividend yield of 2.47%.
The firm has updated its model to reflect greater cost savings in the fourth quarter of 2025 and fiscal year 2026, projecting 30 basis points of additional OIBDA margin expansion to approximately 23.3% in fiscal 2026.
Bernstein also raised its third-quarter 2025 digital revenue estimates by $15 million to account for the one-time impact of the Frontier legal settlement, while increasing its fiscal 2026 adjusted OIBDA estimate by 1% and its earnings per share forecast by 1.5%.
In other recent news, Warner Music Group has announced a significant $1.2 billion joint venture with Bain Capital to enhance its music catalog purchasing power. This strategic move is expected to strengthen Warner’s position in both the recording and publishing sectors. Additionally, Warner Music Group has outlined plans to achieve approximately $300 million in annual cost savings, a development viewed positively by Bernstein SocGen Group, which reaffirmed its Outperform rating with a $32.00 price target. Meanwhile, Goldman Sachs has downgraded Warner Music Group’s stock from "Buy" to "Neutral," citing weaker-than-expected growth in subscription and ad-supported streaming revenues for the second quarter of fiscal year 2025. The firm’s revised price target is now set at $28.00, reflecting a more cautious outlook on Warner’s financial health. JPMorgan also adjusted its price target to $32, maintaining an Overweight rating, following Warner’s second-quarter performance and challenges in the Chinese market. Despite these challenges, analysts at Bernstein SocGen Group remain optimistic about Warner Music’s potential, highlighting the company’s strong management and strategic initiatives. The firm anticipates significant digital revenue growth in 2026, driven by new subscription tiers and efficiency gains.
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