Shares of Warner Music Group Corp. fell nearly 7 percent early Friday after Citigroup cut its recommendation on the stock from “buy” to “sell,” a day after the music label reported that it significantly reduced its second quarter loss.

Shares of Boston-based Warner, which has most of its operations in Burbank, were down 55 cents to $4.72 in mid-morning trading Friday on the New York Stock Exchange. Citi, which warned that Warner may have to renegotiate its existing term loan in December, cut its price target on the stock from $13 to $7.

Warner said online and foreign sales helped reduce the company’s losses during its fiscal third quarter and allowed it to beat Wall Street expectations.

The music company reported late Thursday that it reduced losses 47 percent to $9 million, or 6 cents per share, in the quarter ended June 30, compared to a year ago. Analysts polled by Thomson Financial, on average, had expected a loss of 18 cents a share.

Revenue rose 5.5 percent to $848 million, although sales were down 1.1 percent when factoring in the benefit of the weak dollar overseas. Analysts expected sales of $769 million.

Chief Executive Edgar Bronfman Jr. said in a Thursday conference call that video game makers such as Los Angeles-based Activision, which licenses music for its popular “Guitar Hero” games, should begin sharing more revenue from product sales.

“I think the (video game) industry as a whole needs to take a very different look at this business and participate more fully and in a much more partnership way,” Bronfman said. “And if that does not become the case, as far as Warner Music is concerned, we will not license to those games.”

Staff writer Brett Sporich contributed to this story.