Warner Music Group Corp.

Warner Music Group had a tough quarter due to macroeconomic headwinds and the impact of currency exchange rates. The company’s total revenue grew by 2% but failed to meet Wall Street expectations and it also missed out on meeting earnings expectations. The strength of its global performance was offset by a weaker quarter in the United States, resulting in flat revenue for recorded music. They faced a challenging comparison with the prior quarter, which featured new music from some of their top performers. With new songs from Ed Sheeran, Cardi-B, David Guetta, and BeBe Rexha, they anticipate a more robust release schedule in the second part of the fiscal year. Besides that, with a 14% increase in revenue, music publishing had another solid quarter. Despite several revenue lines experiencing pressure, its operating cash flow growth was strong. Among key updates, the company announced the launch of Rhythm City, a music-themed social roleplaying experience on Roblox, in collaboration with Gamefam. This launch should give users access to various digital goods that are only available on Roblox and introduce them to musicians and artists. They remain confident in their future growth. We give Warner Music Group a ‘Hold’ rating with a revised target price.