Warner Music Posts Mixed Q1; Music Streaming Demand Will Remain Strong Despite Economic Worries

Warner Music started fiscal 2023 on a mixed note with first-quarter revenue just below and adjusted EBITDA just ahead of FactSet consensus. Streaming demand remains strong, but growth has decelerated, and foreign currency headwinds remain an issue. Results also suffered from the economic uncertainty impact on ad revenue and a tough comp that included an additional week. Despite the top-line miss, we still believe Warner Music will benefit from deals with newer emerging platforms and price hikes at music streaming services. While consumer spending may be hit by economic worries, unlimited subscriptions like music streaming have a low cost per hour of entertainment, increasing their value during economic uncertainty. We maintain our $36 fair value estimate.