Macquarie analyst Tim Nollen has reiterated their neutral stance on WMG stock, giving a Hold rating today.
Tim Nollen has given his Hold rating to Warner Music Group due to a combination of factors. Warner Music Group’s results exceeded expectations, with revenues growing 6% in F4Q23 and an overall FY23 growth of 4% (ex FX). These growth figures were bolstered by a substantial increase in digital streaming revenue, which rose by 10%, and a 17% surge in Music Publishing. Despite not fully benefiting from Spotify’s price action in the quarter, the company saw a clear improvement in ad-supported revenue, which grew 7%.
In terms of profitability, the company’s adj. OIBDA grew 19% to $291m, surpassing estimates. The adj. OIBDA margin also expanded 100bps to 20.5% in FY23, with another 100bps of margin expansion expected in FY24. There are several drivers for future revenue growth, including recent price increases at Spotify and other platforms, and a shift towards an artist-centric royalty model which could further boost revenues. The company’s partnership with YouTube to use AI tools to support emerging artists also signals a shift from defending copyright to a more offensive strategy. However, the in-housing of BMGs, which accounted for 4% of recorded music in FY23, is expected to slow revenue growth in FY24.
Nollen covers the Communication Services sector, focusing on stocks such as Walt Disney, Omnicom Group, and Roku. According to TipRanks, Nollen has an average return of 0.6% and a 39.53% success rate on recommended stocks.
In another report released today, Barclays also maintained a Hold rating on the stock with a $35.00 price target.
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Warner Music Group (WMG) Company Description:
With about $3.5 billion in revenue, Warner Music Group is one of the largest music companies in the world. More than 80% of Warner’s revenue comes from recorded music, while the remainder is generated from music publishing.
Read More on WMG:
- Warner Music Group Corp. Reports Results for Fiscal Fourth Quarter and Full Year Ended September 30, 2023
- Warner Music reports Q4 EPS 29c, consensus 25c
- Notable companies reporting before tomorrow’s open
- Block upgraded, Bristol Myers downgraded: Wall Street’s top analyst calls
- Warner Music initiated with an Equal Weight at Wells Fargo
