Goldman Says Warner Music Is Ready For A Fall; Warner Music Falls

Beleaguered Warner Music Group (WMG) has had a nice little run since April — after dropping below $5, shares had rallied above $8.50 last week. That’s too high, Goldman’s Ingrid Chung declared today, putting a “sell” on Edgar Bronfman Jr.’s baby.

This wasn’t the most bearish of calls — WMG was trading at $8.26 when Ingrid put out her note, and she put a price target of $8 on it — but it has been effective: WMG has now dropped more than 6%, to $7.66.But it’s easy to get caught up in the minute-to-minute movement of a stock like WMG (which tends to move in mysterious ways, anyway). The bigger question: How’s the business doing?

Not so bad, Ingrid says. But also not so good: While the music industry continues to contract, she thinks Edgar and crew are doing a reasonable job of expanding their market share. And she doesn’t seem worried about their ability to meet debt convenants, a prospect which skeeved out investors last quarter. She’s just worried that there’s not much more they can do to grow.

Her predictions for the June quarter, which Warner will announce on Thursday:

Record Music revenue: $625M down 4% y/y
Music Publishing: $165M, up 8%

Record Music EBITDA: $89 million, down 5%
Publishing EBITDA $30 million, down 1%

See Also: Who’s Buying WMG Shares?

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