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Warner Music Group (WMG)
NASDAQ:WMG
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Warner Music Group
(NASDAQ:WMG)
74Outperform
Positive Factors
Publishing Agreement
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 Certainty
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.
Streaming Industry 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.
Warner Music Group (WMG) vs. S&P 500 (SPY)
Market Cap
$16.30B
Dividend Yield2.29%
Average Volume (3M)2.20M
Price to Earnings (P/E)32.1
Beta (1Y)0.86
Revenue Growth0.75%
EPS Growth9.36%
CountryUS
Employees5,800
SectorCommunication Services
Sector Strength74
IndustryEntertainment
Share Statistics
EPS (TTM)0.97
Shares Outstanding144,980,730
10 Day Avg. Volume2,758,605
30 Day Avg. Volume2,200,075
Financial Highlights & Ratios
PEG Ratio3.43
Price to Book (P/B)N/A
Price to Sales (P/S)2.66
Price to Cash Flow (P/CF)12.70
P/FCF Ratio11.60
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$36.58Price Target Upside18.27% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering12
Warner Music Group Business Overview & Revenue Model
Company DescriptionWarner Music Group (WMG) is a global leader in music entertainment, operating in the recorded music and music publishing sectors. It owns and operates a diverse roster of artists and labels across all music genres. WMG's core services include the signing and development of recording artists, songwriters, and content creators, as well as the marketing, distribution, and licensing of music content worldwide.
How the Company Makes MoneyWarner 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 demonstrates strong revenue growth and operational efficiency. The company effectively manages its cost structures, reflected in stable profit margins. However, high leverage remains a concern, necessitating prudent financial management. Consistent cash flow generation supports ongoing operations and debt obligations, but careful attention to capital expenditures and financing strategies is essential to maintain financial health.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.78
Positive
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.65
Positive
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.72
Positive
| 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
Negative
30.93
Price Trends
32.93
Negative
32.20
Negative
31.03
Negative
Market Momentum
-0.45
Positive
35.78
Neutral
17.26
Positive
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 30.93 is below the 20-day moving average (MA) of 32.51, below the 50-day MA of 32.93, and below the 200-day MA of 31.03, indicating a bearish trend. The MACD of -0.45 indicates Positive momentum. The RSI at 35.78 is Neutral, neither overbought nor oversold. The STOCH value of 17.26 is Positive, 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 (59)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
79 Outperform | $146.88B | 18.96 | 14.40% | 0.39% | 1.77% | 18.85% | |
75 Outperform | $112.12B | 91.39 | 28.91% | ― | 18.36% | ― | |
74 Outperform | $16.30B | 32.14 | 100.20% | 2.29% | 0.75% | 9.36% | |
73 Outperform | $1.89T | 32.31 | 24.29% | ― | 10.99% | 91.61% | |
68 Neutral | $30.51B | 49.62 | 827.53% | ― | 1.79% | 99.46% | |
59 Neutral | $27.83B | 1.88 | -18.16% | 4.00% | 2.13% | -44.45% | |
49 Neutral | $7.16B | ― | -37.33% | 5.07% | -2.84% | -249.80% |
* Communication Services Sector Average
Performance Comparison
WMG
Warner Music Group
30.93
-1.67
-5.12%
AMZN
Amazon
178.41
-6.66
-3.60%
LYV
Live Nation Entertainment
126.06
22.54
21.77%
SIRI
Sirius XM Holdings
21.13
-12.47
-37.11%
SONY
Sony Group
23.38
6.47
38.26%
SPOT
Spotify
558.42
248.11
79.96%
Warner Music Group Earnings Call Summary
Earnings Call Date: Feb 6, 2025 | % Change Since: -3.16% | Next Earnings Date: May 13, 2025
Earnings Call Sentiment Neutral
The earnings call highlighted strong growth in key areas such as subscription streaming, Grammy wins, and strategic acquisitions, despite facing challenges with foreign exchange headwinds, declines in ad-supported streaming, and other revenue pressures.Highlights
Record-Breaking Grammy Wins
Artists and songwriters from Warner Music Group won multiple Grammy Awards, including Charli XCX winning her first three, Bruno Mars winning his 16th, and Amy Allen winning the Songwriter of the Year award.
Strong Revenue and OIBDA Growth
Total company revenue and adjusted OIBDA grew by 41% each, driven by strong performance across recorded music and music publishing.
Subscription Streaming Growth
Subscription streaming revenue grew by 7%, showing resilience despite expected deceleration from last year’s double-digit growth.
Acquisition of Tempo Music
Warner Music Group acquired a controlling interest in Tempo Music, providing access to high-quality music rights and robust margins, expected to be accretive over time.
New Deals with Spotify and Amazon
Renewed agreements with Spotify and Amazon aim to expand the music ecosystem and increase the value of music.
Lowlights
FX Headwinds Impacting Margins
Significant foreign exchange headwinds created a roughly 200 basis point negative impact on adjusted OIBDA margin due to the strengthening U.S. dollar.
Ad-Supported Streaming Decline
Ad-supported streaming revenue declined by 7%, driven by timing of deal renewals and content delivery issues.
Challenges in E-commerce and Concert Promotion
Weakness in e-commerce business EMP and lower concert promotion revenue in France contributed to a 3% decrease in artist services and expanded rights revenue.
Licensing Revenue Drop
Licensing revenue decreased by 39% due to the comparison against a licensing agreement extension in the prior-year quarter.
Company Guidance
During Warner Music Group's fiscal first quarter earnings call for 2025, the company reported significant growth metrics despite facing macroeconomic challenges. Total company revenue and adjusted OIBDA both increased by 41%, with recorded music revenue rising by 4% and music publishing revenue growing by 7%. Subscription streaming within recorded music saw a 7% growth, although this marked a deceleration from the previous year's double-digit growth due to lapping DSP price increases. Despite currency headwinds contributing to a 200 basis point impact on adjusted OIBDA margin, the company's strategy to increase market share, enhance music value, and improve efficiency remains strong. Noteworthy achievements include Warner Music's artists winning multiple Grammy Awards and expansion through strategic acquisitions like Tempo Music, expected to drive future growth and operational efficiency.Warner Music Group Corporate Events
Executive/Board ChangesBusiness Operations and Strategy
Warner Music Group Updates CEO Compensation Structure
Neutral
Jan 3, 2025
Warner Music Group has amended its employment agreement with CEO Robert Kyncl, replacing his annual performance share units with restricted stock units valued at $10.6 million. This shift aligns with the company’s strategic incentive plans, reflecting its focus on executive performance and company growth.
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.