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Warner Music Group (WMG)
NASDAQ:WMG

Warner Music Group (WMG) AI Stock Analysis

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Warner Music Group

(NASDAQ:WMG)

Rating:64Neutral
Price Target:
$30.00
▲(13.77%Upside)
Warner Music Group's stock performance is characterized by strong financials and cash flow, but high leverage and premium valuation pose risks. Technical indicators suggest a bearish trend, while strategic initiatives and leadership changes provide some optimism for future growth. The company's ability to manage its high debt levels and capitalize on new strategic directions will be crucial for maintaining and improving its stock performance.
Positive Factors
Licensing Agreements
The new publishing agreement with SPOT includes a direct licensing model, which is believed to be an improvement in economics compared to the prior CRB rate.
Revenue Predictability
The new agreement with SPOT provides increased level of certainty regarding several revenue drivers, adding visibility and predictability into WMG's business model.
Negative Factors
Disappointing Financial Results
Warner Music Group reported disappointing F2Q25 results which were below revenue and adj. OIBDA expectations.
Market Share in China
Subscription growth trends are under pressure, leading to a challenging market share outlook in China.
Streaming Revenue Growth
Streaming revenue growth and margin expansion in FY25 appears to be again lower than previously expected.

Warner Music Group (WMG) vs. SPDR S&P 500 ETF (SPY)

Warner Music Group Business Overview & Revenue Model

Company DescriptionWarner Music Group Corp. operates as a music entertainment company in the United States, the United Kingdom, Germany, and internationally. The company operates through Recorded Music and Music Publishing segments. The Recorded Music segment is involved in the discovery and development of recording artists, as well as related marketing, promotion, distribution, sale, and licensing of music created by such recording artists; markets its music catalog through compilations and reissuances of previously released music and video titles, as well as previously unreleased materials; and conducts its operation primarily through a collection of record labels, such as Warner Records and Atlantic Records, as well as Asylum, Big Beat, Canvasback, East West, Erato, FFRR, Fueled by Ramen, Nonesuch, Parlophone, Reprise, Roadrunner, Sire, Spinnin' Records, Warner Classics, and Warner Music Nashville. This segment markets, distributes, and sells music and video products to retailers and wholesale distributors; independent labels to retail and wholesale distributors; and various distribution centers and ventures, as well as retail outlets, online physical retailers, streaming services, and download services. The Music Publishing segment owns and acquires rights to approximately one million musical compositions comprising pop hits, American standards, folk songs, and motion picture and theatrical compositions. Its catalog includes approximately 100,000 songwriters and composers; and various genres, including pop, rock, jazz, classical, country, R&B, hip-hop, rap, reggae, Latin, folk, blues, symphonic, soul, Broadway, electronic, alternative, and gospel. This segment also administers the music and soundtracks of various third-party television and film producers and studios. The company was founded in 1929 and is headquartered in New York, New York.
How the Company Makes MoneyWMG generates revenue primarily through its Recorded Music and Music Publishing segments. In the Recorded Music segment, the company earns money from the sale and streaming of recorded music, licensing of recordings, and merchandising. This includes revenue from digital platforms like Spotify and Apple Music, physical sales, and performance rights. The Music Publishing segment makes money by licensing compositions for use in media, covers, and public performances, as well as collecting royalties from various sources. WMG also benefits from strategic partnerships with digital service providers and collaborations with other entertainment entities, which enhance its distribution capabilities and expand its revenue streams.

Warner Music Group Earnings Call Summary

Earnings Call Date:May 08, 2025
(Q2-2025)
|
% Change Since: -11.75%|
Next Earnings Date:Aug 12, 2025
Earnings Call Sentiment Neutral
The earnings call highlights modest revenue growth in Recorded Music and Music Publishing, strong physical sales, and significant chart success, indicating effective A&R investments and technology initiatives. However, these are balanced by declines in adjusted OIBDA, ad-supported streaming, and challenges in China, which impact overall growth expectations.
Q2-2025 Updates
Positive Updates
Recorded Music Revenue Growth
Recorded Music revenue increased by 1%, driven by a 3% growth in subscription streaming. This indicates resilience in a challenging market.
Music Publishing Revenue Increase
Music Publishing revenue grew by 3%, with streaming revenue up by 2% due to digital deal renewals, reflecting strong performance in the publishing segment.
Physical Revenue Increase
Physical revenue increased by 2% due to strong releases in the U.S. and Japan, showcasing the enduring appeal of physical music formats.
Chart Success and Market Share
WMG's artists hold 5 of the top 10 tracks on the Billboard global chart. The company's share on the Spotify global chart has grown nearly 50% since mid-2023, indicating effective A&R investment.
Investment in Technology
Launch of WMG Pulse app, providing real-time insights for artists and songwriters, showing investment in tech to enhance artist services.
Negative Updates
Adjusted OIBDA Decline
Total company adjusted OIBDA decreased by 1%, and adjusted OIBDA margin decreased by 50 basis points, impacted by revenue mix.
Ad-supported Streaming Decline
Ad-supported streaming revenue declined by 3% due to a soft overall ad environment.
Challenges in China
Market share loss in China contributed to the challenging quarter, with expectations of continued trends affecting subscription streaming growth.
Artist Services and Expanded Rights Revenue Decline
Revenue decreased by 6% due to lower concert promotion revenue, primarily in France, and ongoing weakness in the e-commerce business.
Lower Subscription Streaming Growth Expectations
The company expects lower subscription streaming growth for the fiscal year, citing continued challenges experienced in the quarter.
Company Guidance
During Warner Music Group's fiscal second quarter earnings call for 2025, CEO Robert Kyncl highlighted key metrics reflecting the company's performance and strategic direction. The company's revenue increased by 1%, with Recorded Music revenue and Music Publishing revenue growing by 1% and 3%, respectively. Subscription streaming within Recorded Music also saw a 3% growth. However, the total company adjusted OIBDA decreased by 1%, and the adjusted OIBDA margin shrank by 50 basis points. Kyncl emphasized the company's focus on three strategic priorities: growing market share, increasing the value of music, and improving efficiency to drive long-term growth and profitability. He noted challenges such as a lighter release schedule, market share pressure in China, and a tough year-over-year comparison in subscription streaming growth. Despite these challenges, Kyncl expressed optimism due to successful new artist signings, strong chart performances, and ongoing technological investments, such as the launch of the WMG Pulse app.

Warner Music Group Financial Statement Overview

Summary
Warner Music Group has demonstrated strong revenue growth, with efficient cost management reflected in stable profit margins. However, the balance sheet indicates significant leverage, suggesting potential financial risks. The company generates consistent cash flow, supporting operations and debt obligations, but needs careful management of capital expenditures and financing strategies.
Income Statement
78
Positive
Warner Music Group has displayed a positive trajectory in its revenue growth over recent years, with a notable increase from $4.46 billion in 2020 to $6.34 billion TTM (Trailing-Twelve-Months) as of 2024. The gross profit margin is robust, reflecting efficient cost management. However, the net profit margin has shown fluctuations, attributed to varying net income levels, although it has stabilized recently. The EBIT and EBITDA margins are healthy, indicating strong operational performance.
Balance Sheet
65
Positive
The balance sheet reveals substantial leverage, with a high debt-to-equity ratio due to significant total debt and relatively low stockholders' equity, though equity has improved from previous losses. The return on equity is strong, reflecting improved profitability. The equity ratio indicates limited asset backing by equity, suggesting potential financial risk if liabilities grow.
Cash Flow
72
Positive
Cash flow analysis shows consistent free cash flow generation, with positive growth in free cash flow over recent years. The operating cash flow to net income ratio is favorable, indicating efficient conversion of net income into cash. Despite solid free cash flow, capital expenditures have impacted investing cash flow, necessitating careful management of financing activities.
Breakdown
TTMSep 2024Sep 2023Sep 2022Sep 2021Sep 2020
Income StatementTotal Revenue
6.34B6.43B6.04B5.92B5.30B4.46B
Gross Profit
2.89B3.07B2.86B2.84B2.56B2.13B
EBIT
810.00M823.00M790.00M714.00M609.00M-229.00M
EBITDA
1.39B1.09B1.16B1.20B915.00M-59.00M
Net Income Common Stockholders
512.00M435.00M430.00M551.00M304.00M-475.00M
Balance SheetCash, Cash Equivalents and Short-Term Investments
601.00M694.00M641.00M584.00M499.00M553.00M
Total Assets
8.01B9.15B8.54B7.83B7.21B6.41B
Total Debt
4.27B4.29B4.26B4.01B3.68B3.44B
Net Debt
3.67B3.59B3.62B3.43B3.18B2.89B
Total Liabilities
7.74B8.48B8.12B7.66B7.17B6.46B
Stockholders Equity
252.00M518.00M307.00M152.00M31.00M-63.00M
Cash FlowFree Cash Flow
540.00M638.00M446.00M416.00M64.00M338.00M
Operating Cash Flow
791.00M754.00M687.00M742.00M638.00M463.00M
Investing Cash Flow
-300.00M-311.00M-300.00M-824.00M-638.00M-219.00M
Financing Cash Flow
-430.00M-396.00M-325.00M188.00M-61.00M-316.00M

Warner Music Group Technical Analysis

Technical Analysis Sentiment
Negative
Last Price26.37
Price Trends
50DMA
28.36
Negative
100DMA
30.43
Negative
200DMA
30.54
Negative
Market Momentum
MACD
-0.72
Negative
RSI
39.63
Neutral
STOCH
63.82
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For WMG, the sentiment is Negative. The current price of 26.37 is below the 20-day moving average (MA) of 26.60, below the 50-day MA of 28.36, and below the 200-day MA of 30.54, indicating a bearish trend. The MACD of -0.72 indicates Negative momentum. The RSI at 39.63 is Neutral, neither overbought nor oversold. The STOCH value of 63.82 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for WMG.

Warner Music Group Risk Analysis

Warner Music Group disclosed 43 risk factors in its most recent earnings report. Warner Music Group reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks

Warner Music Group Peers Comparison

Overall Rating
UnderperformOutperform
Sector (61)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
WMWMG
64
Neutral
$13.75B30.6589.20%2.73%-0.91%-14.87%
63
Neutral
$476.71M62.292.16%11.32%3803.23%
61
Neutral
$14.60B5.95-4.32%3.69%2.76%-30.49%
47
Neutral
$1.93B168.75%-2.85%75.96%
43
Neutral
$36.29M-270.84%88.72%-85.53%
42
Neutral
$1.93B259.47%-2.85%75.96%
41
Neutral
$1.85B19.96%-285.78%
* Communication Services Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
WMG
Warner Music Group
26.37
-3.60
-12.01%
LGF.A
Lions Gate Entertainment Class A
8.59
0.59
7.37%
LGF.B
Lions Gate Entertainment Class B
7.69
0.37
5.05%
ANGH
Anghami Inc.
0.54
-0.48
-47.06%
RSVR
Reservoir Media
7.30
-0.41
-5.32%
LION
Lionsgate Studios
6.46
-1.50
-18.84%

Warner Music Group Corporate Events

Dividends
Warner Music Group Declares Quarterly Cash Dividend
Positive
May 16, 2025

On May 16, 2025, Warner Music Group announced a regular quarterly cash dividend of $0.18 per share for its Class A and Class B Common Stock, payable on June 3, 2025, to shareholders recorded by May 27, 2025. This decision underscores Warner Music Group’s commitment to providing consistent returns to its investors, reflecting its stable financial performance and strategic positioning within the music industry.

The most recent analyst rating on (WMG) stock is a Hold with a $32.00 price target. To see the full list of analyst forecasts on Warner Music Group stock, see the WMG Stock Forecast page.

Executive/Board ChangesBusiness Operations and Strategy
Warner Music Group Appoints New CFO Armin Zerza
Positive
Apr 14, 2025

On April 14, 2025, Warner Music Group announced that Armin Zerza will join as Executive Vice President and Chief Financial Officer effective May 5, succeeding Bryan Castellani, who will remain as an advisor to ensure a smooth transition. Zerza, with extensive experience from Activision Blizzard and Procter & Gamble, is expected to drive Warner Music Group’s long-term strategy and growth, leveraging his expertise in global financial operations and strategic value creation.

Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.