Jefferies trims Warner Music target, says BMG news reaction ‘too harsh’

Jefferies lowered the firm’s price target on Warner Music to $35 from $37 and keeps a Buy rating on the shares after BMG announced on Monday that it will not renew its digital distribution agreement and is electing to move operations in-house. The firm estimates the impact to be about $300M in revenue, but low-single digits of adjusted OIBDA contribution for Warner, or $5M-$8M. The stock is down greater than 5% on the news, “meaning less than 1% of EBITDA has wiped 0.5x off the multiple,” says the analyst, who calls this market reaction “too harsh.”