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Spotify, Warner lifted as Guggenheim sees potential for market-leading financial growth in music industry

Published 2023-03-22, 10:26 a/m
Updated 2023-03-22, 10:26 a/m
© Reuters.

© Reuters.

By Sam Boughedda

Guggenheim analysts upgraded Spotify (NYSE:SPOT) and Warner Music Group (NASDAQ:WMG) to Buy from Neutral in a note to clients on Wednesday.

The analysts said the firm believes the global music industry, including labels, platforms, and artists, has "the potential for market-leading financial growth over the next several years."

They lifted the firm's price target on Spotify to $155 from $120 and WMG to $36 from $35.

"With a decade-long period of largely promotional pricing ending for on-demand streaming music, we see an attractive revenue growth runway for the industry that will exceed current consensus estimates, in our view," they wrote.

They explained that data released on March 21, 2023, by recorded music industry representative IFPI show that strong top-line growth continued in 2022, fueled by global consumer payments via streaming platforms.

"At 9% total recorded music revenue growth in 2022, off an all-time record 2021 base, the industry added $2.1 billion in annual revenue, its third-largest annual increase," the analysts added.

They noted that essential label and distribution platform relationships are contentious, undermining the pursuit of economic growth, but they believe compromise is within reach and "a collaborative and still-competitive environment can help make music among the most attractive investment opportunities in media."

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