Warner Music Group (WMG) AI Stock Analysis

• Market Cap: $15.20B
• Dividend Yield: 2.48%
• Average Volume (3M): 2.06M
• Price to Earnings (P/E): 30.0
• Beta (1Y): 0.71
• Revenue Growth: 0.75%
• EPS Growth: 9.36%
• Country: US
• Employees: 5,800
• Sector: Communication Services
• Sector Strength: 80
• Industry: Entertainment
• EPS (TTM): 0.97
• Shares Outstanding: 144,980,730
• 10 Day Avg. Volume: 1,217,937
• 30 Day Avg. Volume: 2,060,270
• PEG Ratio: 3.20
• Price to Book (P/B): N/A
• Price to Sales (P/S): 2.66
• Price to Cash Flow (P/CF): 12.70
• P/FCF Ratio: 11.60
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: $35.82
• Price Target Upside: 25.20% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 11

Warner Music Group's stock score is primarily supported by strong financial performance and strategic growth initiatives. However, high leverage and bearish technical indicators, along with a premium valuation, pose risks. The company's recent earnings call and corporate developments are positive but are offset by challenges like FX headwinds and declining ad-supported streaming.

Positive Factors

Artist Engagement

The deals with Spotify and Amazon are expected to lead to higher monetization and create new ways for artists to connect with fans.

New 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

Ad-Supported Streaming

There is an apparent slowdown in ad-supported streaming, suggesting WMG's business is not completely immune from macro headwinds.

Music Streaming Growth

Concerns are raised about the underlying music streaming industry growth slowing more quickly than expected, which is reflected in WMG's multiple compression over the past year.

Recorded Music Revenue

Recorded music revenue decreased 6.9%, driven by lower concert promotion revenue and a decrease in revenue related to the exit of owned and operated media properties.

Warner Music Group Business Overview & Revenue Model

Company Description

Warner 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 Money

Warner Music Group generates revenue through several key streams. The primary source is recorded music, which includes the sale of physical and digital music, as well as streaming services where they earn royalties from platforms like Spotify, Apple Music, and YouTube. Another significant revenue stream is music publishing, where WMG earns money from licensing the rights of its extensive catalog of songs to be used in films, TV shows, commercials, and other media. The company also earns from merchandise sales and live performances, although these are lesser compared to its core services. Partnerships with digital platforms and media companies enhance its distribution network and revenue potential, while strategic acquisitions of music catalogs and labels expand its market footprint.

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

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

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

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
TTM	Sep 2024	Sep 2023	Sep 2022	Sep 2021	Sep 2020
Income Statement		Total Revenue
6.34B	6.43B	6.04B	5.92B	5.30B	4.46B
	Gross Profit
2.89B	3.07B	2.86B	2.84B	2.56B	2.13B
	EBIT
810.00M	823.00M	790.00M	714.00M	609.00M	-229.00M
	EBITDA
1.39B	1.09B	1.16B	1.20B	915.00M	-59.00M
	Net Income Common Stockholders
512.00M	435.00M	430.00M	551.00M	304.00M	-475.00M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
802.00M	694.00M	641.00M	584.00M	499.00M	553.00M
	Total Assets
9.15B	9.15B	8.54B	7.83B	7.21B	6.41B
	Total Debt
4.22B	4.29B	4.26B	4.01B	3.68B	3.44B
	Net Debt
3.42B	3.59B	3.62B	3.43B	3.18B	2.89B
	Total Liabilities
8.45B	8.48B	8.12B	7.66B	7.17B	6.46B
	Stockholders Equity
545.00M	518.00M	307.00M	152.00M	31.00M	-63.00M
Cash Flow		Free Cash Flow
540.00M	638.00M	446.00M	416.00M	64.00M	338.00M
	Operating Cash Flow
791.00M	754.00M	687.00M	742.00M	638.00M	463.00M
	Investing Cash Flow
-300.00M	-311.00M	-300.00M	-824.00M	-638.00M	-219.00M
	Financing Cash Flow
-430.00M	-396.00M	-325.00M	188.00M	-61.00M	-316.00M

Warner Music Group Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 28.61
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Positive
• RSI: Neutral
• STOCH: 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 28.61 is below the 20-day moving average (MA) of 29.81, below the 50-day MA of 32.22, and below the 200-day MA of 30.96, indicating a bearish trend. The MACD of -1.08 indicates Positive momentum. The RSI at 39.12 is Neutral, neither overbought nor oversold. The STOCH value of 28.45 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for WMG.

Warner Music Group Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
RSVR	68 Neutral	$471.63M	60.55	2.22%	―	11.32%	3803.23%
WMG	64 Neutral	$15.20B	29.98	100.20%	2.48%	0.75%	9.36%
Sector *	58 Neutral	$13.61B	6.75	-2.45%	3.85%	2.33%	-35.55%
LGF.A	41 Neutral	$1.77B	―	168.75%	―	-2.85%	75.96%
LION	41 Neutral	$1.88B	―	19.96%	―	―	-285.78%
LGF.B	39 Underperform	$1.77B	―	259.47%	―	-2.85%	75.96%
ANGH	33 Underperform	$17.38M	―	-80.27%	―	13.03%	19.07%

Warner Music Group Corporate Events

Warner Music Group Appoints New CFO Armin Zerza

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.

Spark’s Take on WMG Stock

According to Spark, TipRanks’ AI Analyst, WMG is a Outperform.

Warner Music Group shows strong revenue growth and operational efficiency, with positive momentum in the stock’s technical indicators. The earnings call revealed solid growth metrics and strategic achievements, although high leverage and premium valuation present potential risks. The dividend yield offers some compensation for valuation concerns.

To see Spark’s full report on WMG stock, click here.