Morgan Stanley downgraded Warner Music Group (WMG, Financials) from Overweight to Equalweight, lowering its price target to $32 from $37. The move reflects growing concern about the pace of growth in music streaming, a key revenue driver for the company.
Analysts now expect WMG's subscription streaming revenue to rise 6.5% in fiscal 2025—at the lower end of guidance and shy of market expectations. They also trimmed growth forecasts for the second half of the fiscal year, citing industry-wide softness. The company's price-to-earnings ratio sits at 30x, with annual revenue of $6.34 billion.
Despite modest gains expected in profitability, growth in streaming for the second quarter is projected to hold steady at 3.5%, with margins improving slightly.
Elsewhere, UBS maintained a Buy rating but lowered its second-quarter revenue forecast to $1.52 billion, still a 2% year-over-year gain. Citi took a more upbeat view, raising its price target to $42 based on improved terms with Spotify (SPOT, Financials). FBN Securities initiated coverage with a neutral stance, pointing to growth potential but ongoing challenges in traditional media.
Moody's upgraded WMG Acquisition Corp.'s credit rating to Ba1, citing operational progress and positive streaming trends.
Warner Music also completed its board elections and auditor ratification during its recent annual shareholder meeting. On the strategic front, the company acquired a majority stake in Tempo Music Investments and expanded its publishing rights, as it looks to deepen its presence in the streaming economy.
