Warner Music Group: Strong End to Fiscal 2023; New CEO Should Drive Growth From Emerging Platforms

Warner Music posted a strong end to fiscal 2022 with fourth-quarter revenue and adjusted EBITDA ahead of FactSet consensus. The demand for streaming music remains strong, but the growth has decelerated. In fiscal 2023, we expect the firm to benefit from not only deals with newer emerging music platforms like TikTok but also from price hikes at music streaming services. Both Apple and Deezer announced price increases recently, and we believe that peers will also raise prices. While inflation and macroeconomic worries may lower consumer spending, all you can consume subscriptions like music streaming have low cost per hour consumed, making these services more valuable to consumers in times of economic uncertainty. We are maintaining our $36 fair value estimate.