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On Monday, Morgan Stanley (NYSE:MS) analysts downgraded Warner Music Group ’s stock rating from Overweight to Equalweight, adjusting the price target to $32.00 from the previous $37.00. Currently trading at $29.12 with a market capitalization of $15.15 billion, WMG shares have declined nearly 10% over the past year. The decision reflects a revised outlook for the global music streaming industry and Warner Music Group’s (NASDAQ:WMG) potential growth. According to InvestingPro data, two analysts have recently revised their earnings expectations downward for the upcoming period.
Analysts at Morgan Stanley expressed a more cautious stance on Warner Music’s future, suggesting that the market’s expectations for the company’s growth might be overly optimistic. With the stock trading at a P/E ratio of 30x and generating annual revenue of $6.34 billion, they specifically revised their forecast for Warner Music’s Recorded Music segment subscription streaming revenue growth in FY25 to approximately 6.5%, which sits at the lower end of the high single-digit percentage (HSD%) guidance and falls below the consensus. InvestingPro subscribers can access detailed financial health scores and 8 additional key insights about WMG’s valuation and growth prospects.
The report further detailed that the analysts expect Warner Music’s adjusted Operating Income Before Depreciation and Amortization (OIBDA) margins to increase modestly. However, for the second fiscal quarter (F2Q), they project an unchanged underlying Recorded Music streaming growth of 3.5%. For the second half of the fiscal year (F2H), the analysts have revised the streaming growth forecast downward by approximately 100 basis points.
The downgrade and price target adjustment come as Morgan Stanley recalibrates its expectations for the industry at large and Warner Music Group in particular. The analysts’ commentary underscores the potential challenges Warner Music may face in achieving the robust growth anticipated by the market.
This move by Morgan Stanley provides investors with a new perspective on Warner Music Group’s stock as the market continues to assess the company’s financial outlook and position within the competitive music streaming landscape.
In other recent news, Warner Music Group has been the focus of several key developments. UBS analyst Batya Levi maintained a Buy rating on Warner Music, adjusting the fiscal second-quarter revenue forecast to $1.52 billion, a slight reduction from the prior estimate but still a 2% year-over-year increase. This adjustment reflects softer advertising revenue, offset by favorable foreign exchange rates. Meanwhile, Moody’s upgraded the corporate family rating of WMG Acquisition Corp. to Ba1, citing expected benefits from music streaming trends and operational improvements. Citi analysts also upgraded Warner Music to a Buy rating, raising the price target to $42, based on favorable contract negotiations with Spotify (NYSE:SPOT). Additionally, FBN Securities initiated coverage with a Sector Perform rating, noting the company’s potential for growth in the streaming sector despite challenges in traditional media sales.
Warner Music recently announced the election of its board of directors and ratification of its independent auditor for fiscal year 2025 during its Annual Meeting of Stockholders. The board election and auditor ratification are crucial for the company’s governance and financial integrity. Furthermore, Warner Music’s acquisition activities included purchasing a 50.1% interest in Tempo Music Investments and investing in music publishing rights. These moves align with the company’s strategy to leverage streaming growth and explore new monetization avenues.
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