Warner Music Posts Weak Q3 With Decelerating Streaming Growth; Lowering FVE to $36

Warner Music reported a weak fiscal 2022 third quarter with revenue in line and adjusted EBITDA below FactSet consensus. While the demand for streaming music remains strong with growth of 9% when normalized for currency effects and one-time issues, the growth has decelerated over the last two quarters into the single-digit range versus 24% in fiscal 2022. Warner Music’s top line also benefited from the return of live music, but this lower-margin revenue pulled down margins. We are lowering our fair value estimate to $36 from $37 to account for slightly lower streaming growth in 2022.