Goldman Sachs has shifted its stance on Warner Music Group (NASDAQ: WMG), moving the stock from “Buy” to “Neutral” with a revised price target of \$28. This follows a similar downgrade from Morgan Stanley and reflects a growing consensus on concerns over slowing growth in the music streaming segment.
📉 The most significant driver of the downgrade is a reduced forecast for streaming revenue. Analysts now expect Warner’s Recorded Music segment to grow at just 6.5% in 2025 — the lower end of the company’s own guidance. This is part of a wider trend impacting the entire music industry, where once-explosive streaming revenue is now showing signs of plateauing.
💼 Despite these headwinds, Warner Music still demonstrates solid financial health. The company’s net margin stands at 2.43% and it posts a return on equity of 6.47%, both respectable figures within the sector. Its debt-to-equity ratio of just 8.03 highlights strong financial discipline, and suggests the company has room to maneuver if it chooses to pursue acquisitions or increase R\&D.
💰 From a dividend perspective, Warner Music provides an annual payout of \$0.72 per share, equating to a dividend yield of roughly 2.6%. The firm has maintained a consistent quarterly dividend policy, with the most recent ex-dividend date in February 2025. However, with a dividend payout ratio of 81.6%, there’s limited headroom for boosting dividends without a corresponding rise in earnings.
🎯 In essence, Warner Music Group remains fundamentally sound, but the caution from Wall Street reflects real concerns about its near-term growth potential. Investors eyeing WMG may want to temper expectations and keep a close watch on both macro trends in streaming and the company’s execution in navigating this slowdown.