Warner Music Group Gets Flurry of Positive Ratings from Wall Street

Warner Music Group is getting the approval of several analysts as many begin initiating coverage of the pure-play music company with positive ratings and price targets ranging from $28 to $40.

• Guggenheim initiates with BUY rating and $36 PT

  • “The addressable market for paid audio consumption is large, expanding, and will be further penetrated in the coming years.”

  • “WMG is uniquely positioned to participate in that growth and to maintain attractive economics given a catalog of “must-have” content.”

  • “WMG will grow its value proposition to distribution partners by adding new artists and content to its offering and to creative partners by facilitating development and growth opportunities.”

• SunTrust Robinson Humphrey initiates with BUY $35 PT

  • “We expect the continued secular shift to streaming (from CDs, downloads, radio) to drive increasing global consumption of music (superior consumer value proposition, accessibility, personalization, discoverability, interactivity)”

Fixed economics of music: The digital distribution of music, popularized by Spotify and Apple Music, has brought the music industry back to growth after nearly 10 years of economic contraction. 

• Streaming: Digital distribution, led by streaming, accounts for 58% of WMG’s total revenue. Guggenheim predicts there will be 681 million global paid music subscribers in 2022. 

Apple and Spotify risk: WMG is reliant on the success of Apple and Spotify, which make up a combined 27% of WMG revenue. Suntrust Robinson estimates 45% of WMG’s digital revenue is derived from these two streaming services.