On Thursday, Tigress Financial Partners maintained a Buy rating on Warner Music Group (NASDAQ:WMG) and increased the 12-month price target to $44.00.
The firm cited WMG's strong positioning to capitalize on the growth of subscription streaming revenue. This optimism is rooted in Warner Music's effective use of technology for artist discovery and audience cultivation, along with the diversification of its content and the expansion into immersive entertainment experiences.
Warner Music Group's recent financial report showed a slight decrease in Q3 2024 revenue, down 0.6% year-over-year to $1.55 billion. Despite a general decline in recorded music sales, streaming growth, supported by a robust roster of artists and favorable industry trends, helped mitigate the downturn. Music Publishing revenues saw a 7.8% increase to $305 million, driven by gains in digital, performance, and synchronization revenues.
Digital revenue within the Music Publishing sector rose by 6.6% year-over-year to $194 million. Performance revenue saw a significant jump, increasing 30.0% to $52 million.
Synchronization revenue, which comes from licensing music for use in various media, grew 2.4% to $42 million. This growth was attributed to heightened international licensing activities. However, mechanical revenue, which includes physical sales, dropped 18.8% to $13 million.
Recorded Music revenue experienced a 2.4% decline year-over-year, settling at $1.25 billion. This decrease reflected a $26 million impact from the planned termination of a distribution agreement with BMG. Despite the overall decline, digital recorded music revenue saw a 4.3% increase to $882 million.
Physical recorded music sales fell by 4.8% to $120 million, and Artist services and expanded rights revenue decreased significantly by 27.1% to $159 million. Licensing revenue also saw a decrease by 2.2% year-over-year to $90 million.
Warner Music Group is actively expanding into high-growth music genres such as Latin, hip-hop, and pop. The company's investments in content development, marketing, and recognition platforms are increasing, with a focus on AI-driven creation and marketing initiatives.
WMG is also broadening its geographic reach to source and develop talent in regions including Asia, Europe, India, Latin America, the Middle East, and Africa. Its use of AI extends to artist development, marketing, and digital rights protection, which contributes to shaping protective legislation.
The firm highlighted WMG's ongoing strategy to enhance shareholder returns through dividend increases and its successful track record of signing new artists and leveraging its extensive music library. The increased price target of $44 reflects a potential return, including dividends, of over 60% from current levels.
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