Atlantic Equities downgrades this music stock as A.I.-created songs threaten revenue growth
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Warner Music Group isn’t shielded from the rise of artificial intelligence in the recording industry, according to Atlantic Equities. The firm downgraded Warner Music to neutral and lowered its price target to $26 per share from $39. Atlantic’s new price target represents 6.6% upside from the stock’s $24.39 close on Thursday. Analyst Hamilton Faber noted that increased competition in the streaming space coupled with the growth of AI-based music could be the perfect storm that will weigh on the stock. “WMG and other music labels insist they should be paid for any AI created track that is derived from their artists’ work, yet the primary defense appears to be regulation, which could take years to pass into law,” Faber said. “While WMG has already lost significant ground this year, we do not believe the AI debate is anywhere near to being resolved.” Faber said there is potential for some optimism that a deal with TikTok, which licenses music from artists under the Warner label for use on the social media platform, could cushion some of the hit to the stock as well as Spotify potentially raising its prices. “All in, it is clear that the top line growth that we had originally envisaged for the music labels is not quite playing out as expected,” Faber said. “Of course, there is an opportunity for this to be compensated for by deals with social, gaming and fitness platforms, which the company terms emerging streaming.” Warner Music Group stock has plummeted more than 30% from the start of the year. WMG YTD mountain Warner Music Group stock has slipped more than 30% this year. — CNBC’s Michael Bloom contributed to this report.