Warner Music Group (WMG) Stock: Is It Time to Buy?

  • Save

Following the release of WMG’s relatively solid fourth-quarter earnings report, many observers and prospective investors are asking whether it’s time to purchase Warner Music Group stock.

On Monday, the New York City-headquartered company unveiled the performance specifics from the fourth quarter of its fiscal year, for the three months ending on September 30th. In summary, increased digital earnings were enough to offset COVID-related income dips on the artist services and performance sides, and total quarterly revenue increased just slightly from Q4 of 2019’s fiscal year. Physical sales also proved resilient, but some investors nevertheless moved to sell their Warner Music Group stock on the heels of the announcement.

To be sure, WMG’s per-share closing price of $29.08 on Friday, November 20th, slipped to about $27.68 on Monday, November 23rd, before rebounding slightly to finish the day at $28.01. At the close of today’s trading hours, Warner Music Group stock was resting at $29.25, representing a more than 4.4 percent surge from Monday’s aforementioned close.

Now, with digital earnings appearing poised to continue rising and the imminent rollout of COVID-19 vaccines increasing the chances of a live music comeback in 2021, multiple financial professionals are weighing in on the long-term value of WMG – and the potential upside for those who are currently considering purchasing a piece of the company.

Morgan Stanley analyst Benjamin Swinburne today maintained his hold rating on Warner Music Group stock, in addition to bumping his target price from $34 to $35. Swinburne, who TipRank indicates has a 63 percent success rate with stock ratings, also set a $44-per-share target price for SiriusXM majority owner and Live Nation stakeholder Liberty Media this month, besides taking a bearish position on iHeartMedia.

Credit Suisse – which adopted one of the more bullish stances on Spotify in September, including a $315 target price – is even more optimistic about Warner Music Group stock. The Zürich-headquartered investment powerhouse set its own WMG target price at $37 per share, or some 20 percent higher than the current value. More broadly, the forecasted worth would mark WMG’s highest price since returning to the stock market earlier this year, following nearly a decade of entirely private ownership.

Needless to say, it appears that these positive assessments of Warner Music Group’s stock-price future depend in large part upon the company’s continued growth in streaming and digital. On this front, it bears mentioning that Universal Music Group is “willing to lean in more aggressively” on promotional collaborations with Spotify, according to the latter’s chief financial officer.

The point could be significant for WMG and Sony Music moving forward – especially because Spotify is now allowing labels and artists to influence listener recommendations without paying an upfront fee, provided that they accept a “promotional recording royalty rate” for the resulting plays.

2 Responses

  1. Tom Hendricks

    Those that know of the ideas of the music revolution and the passion of the thousands of musicians involved, see the end of the Big Three Labels on the horizon. The Big Three are bad at finding good music and even worse at sales!