Morgan Stanley analyst Ben Swinburne reiterated his forecast of double-digit music industry streaming growth for years, even in a slowing economy.
He estimates that Apple Inc AAPL (reiterated Overweight and $177 price target) Apple Music is the #2 player in the U.S. at 30% at YE22.
Apple's position made the price hikes meaningful to industry growth for rights holders like Warner Music Group Corp WMG (reiterated Overweight with a $31 price target).
As he has highlighted in the past, music labels are the biggest beneficiary of platform price hikes in the streaming music value chain.
As such, these price increases support his expectation for streaming growth acceleration at Warner in FY23, which is key to earnings and multiple expansions from here.
He points out that yesterday's price changes move Apple Music $1 ahead of all Spotify Technology S.A. SPOT (reiterated Overweight with a $120 price target) tiers in the U.S., even considering the price increase Spotify took on its Family Plan last year.
While not the only consideration behind Spotify's pricing decisions, he notes that competitor price increases should go a long way in helping Spotify increase its prices over time.
He estimates that ~35% of total Premium revenue is derived in the U.S. (and ~30% of consolidated revenue).
As a result, he adds that any further domestic price increases at Spotify would have a meaningful impact on overall revenue growth.
Price Action: AAPL shares traded higher by 1.46% at $151.63 on the last check Tuesday.
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