Streaming Drives Q2 Outperformance at Warner Music; Physical Media Bounces Back after Tough 2020

Warner Music reported another strong quarter as fiscal second-quarter revenue and EBITDA beat FactSet consensus estimates. Top line growth was once again driven by increased consumption on both traditional streaming platforms and emerging ones like in-home fitness and live streaming. While live music remains largely sidelined, artist services was only down 3% as direct-to-consumer merchandising is gaining steam. We expect that widespread COVID-19 vaccinations should allow live music to return in the second half of the calendar year in many markets. We are maintaining our narrow moat rating and $33 fair value estimate.