New York-based Warner Bros. Discovery, Inc. (WBD), with a market cap of $19.6 billion, is a media and entertainment company renowned for its diverse content portfolio across television, film, and streaming services. It captivates audiences globally with popular brands like Discovery Channel, HBO Max, and Warner Bros. Pictures.
WBD stock has considerably underperformed the broader market over the past 52 weeks. WBD has declined 35.7% over this time frame, while the broader S&P 500 Index ($SPX) has rallied 27.5%. In 2024 alone, shares of WBD are down 29.3%, compared to SPX's 11.2% gains on a YTD basis.
Zooming in further, WBD also lags behind the Dynamic Leisure And Entertainment Invesco ETF's (PEJ) 9.9% gains over the past 52 weeks.
WBD's lackluster performance compared to broader indexes over the past year is due to strikes, declining ad revenue, fierce streaming competition, juggling merger debt, and missing financial goals.
On April 30, shares of WBD plunged 9% after reports of its TNT cable network losing NBA rights to Comcast (CMCSA), and further in response to Paramount Global's (PARA) weak earnings and its merger progress with Skydance. However, most recently, shares of Warner Bros. Discovery rose about 3.1% on May 9, post-Q1 earnings, due to debt repayment, streaming growth, and new content plans.
For the current fiscal year, ending in December, analysts expect WBD's loss per share to decline 70.3% year over year to $0.38 on a diluted basis. The company's earnings surprise is disappointing. It has missed the consensus estimate in all of the last four quarters.
In the last reported quarter, Warner Bros. Discovery's top and bottom lines fell short of analysts' forecasts, despite strength in its streaming unit.
Among the 24 analysts covering WBD stock, the consensus rating is "Moderate Buy," based on 12 "Strong Buy" ratings, one "Moderate Buy," nine "Holds," and two "Strong Sells."
This configuration is slightly more bullish than two months before, with 11 analysts suggesting a "Strong Buy."
On May 13, Barrington Research analyst James Goss lowered Warner Bros Discovery's price target by 16.7%, from $18 to $15, but maintained a "Buy" rating. Reviewing Q1 earnings results, Goss applied a "conservative multiple" to the EBITDA model for linear networks and film studios, while taking a "more aggressive stance" on growth estimates for the DTC segment. Goss predicts that Warner Bros Discovery will continue generating strong cash flows and eventually reach a sustainable position despite leverage reduction challenges.
The mean price target of $12.50 represents a premium of 55.3% to WBD's current levels. However, the Street-high price target of $20 suggests an ambitious upside potential of 148.4%.
On the date of publication, Sohini Mondal did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
