Will Warner Catch A Cold?

There’s a saying about Wall Street sneezing and the rest of the world catching a cold, but a Digital Music News story says the germs could be passing the other way.

It says Sony Corporation’s purchase of Bertelsmann’s Sony-BMG stake for $900 million equates to a multiple of roughly 4.5, which is bad news for Warner Music Group according to Pali Research analysts.

The analysts reached that figure by estimating a pro forma earnings (EBITDA) figure of $400 million for the new Sony-owned company and valuing the whole at $1.8 billion.

They say it’s bad news for Warners because it’s currently trading at seven times its 2008 EBITDA, although that figure also includes publishing assets.

Still, the analysts at Pali reckon Sony’s acquisition price may well have negative implications for music industry valuations. Warners, which has seen its stock price grow rapidly since the beginning of the year, now looks to be overvalued.

Warner has just posted a 9 percent loss on Q3 revenues of $848 million – much better than expected – but the share price still fell 71 cents to $7.73.