Warner Music's Stock Downgraded By Atlantic Equities As Artificially Created Songs Threaten Revenue Growth

According to Atlantic Equities, Warner Music Group is not immune to the impact of artificial intelligence in the music industry. The firm has downgraded Warner Music to a neutral rating and revised its price target to $26 per share, down from $39. Despite the downgrade, this new price target still represents a potential 6.6% upside from the stock's previous closing price of $24.39.

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Analyst Hamilton Faber highlighted the increased competition in the streaming space and the growth of AI-based music as factors that could negatively affect Warner Music's stock.

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Faber mentioned that music labels like WMG assert their right to be compensated for any AI-generated tracks derived from their artists' work, but the primary defense seems to rely on regulation, which may take years to be enacted into law. The ongoing AI debate remains unresolved, and this uncertainty weighs on Warner Music's outlook.

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Faber did acknowledge some potential sources of optimism for the stock. A potential deal with TikTok, where Warner's music is licensed for use on the social media platform, could help mitigate some of the negative impact.

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Additionally, if Spotify were to raise its prices, it could also provide some relief. However, Faber emphasized that the anticipated top-line growth for music labels has not materialized as expected.

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Warner Music Group's stock has experienced a significant decline of over 30% since the beginning of the year.

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