Wells Fargo has initiated new coverage of Universal Music Group (UMG) and Warner Music Group (WMG), offering distinctly different assessments for each major label.

For Warner Music Group, analysts Omar Mejias and Steve Cahall issued an equal-weight rating with a $35 target price. The assessment cites WMG as a "company in transition," with analysts remaining cautious until seeing sustained market share recovery and clarity on technology investments. WMG shares closed at $32.85, down roughly 7% for the year. The analysts noted concerns about Atlantic's performance and the impact of tech investments on both near-term margins and long-term growth.

Universal Music Group received a more favorable outlook, with analysts issuing an overweight rating and a €28 target price. UMG shares closed at €24.17 on the Euronext Amsterdam. The positive assessment stems from:

• "Best in class" A&R management
• Strong potential for superfan monetization
• Strategic positioning for AI developments
• Leadership in streaming reform initiatives

UMG demonstrated strong performance with nearly $3 billion in revenue for Q3 2023, and recently attracted a €6.1 million investment from Bill Ackman.

The coverage comes as the music industry prepares for significant changes in streaming compensation, including new penalties for artificial streams on Spotify's platform starting next year.

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