By Senad Karaahmetovic
Shares of Warner Bros Discovery (NASDAQ:WBD) are trading over 3% lower in pre-market Friday after the entertainment company reported worse-than-expected results for its fourth quarter.
WBD posted a loss per share of $0.86 on revenue of $11.01 billion. Analysts were expecting a loss per share of $0.29 on sales of $11.23B. The parent company of TNT and CNN reported 96.1 million subscribers at the end of the quarter.
“We’re seeing strong momentum across the enterprise, including our exciting long-term plans for DC Studios, the historic success of our latest HBO series The Last of Us, the significant financial and operating gains in DTC, and the record sales of our newest game Hogwarts Legacy,” CEO David Zaslav said.
Wells Fargo analysts believe the worst is behind WBD.
“The multi-strat media plan of growing and improving DTC, managing Networks decline and monetizing where it makes sense is taking shape, and appears to support healthy FCF. But, at 5x leverage with macro improvement baked into the guide there is scope for downside too. We see ads as the key near-term risk point esp. into conference season,” they said in a note.
Guggenheim analysts hiked the price target to $18 per share from the prior $16.50. They believe the focus is now shifting to a streaming service relaunch.
“The company will host an event on April 12 to introduce its redesigned DTC service. Details remain limited, but we see investor confidence in an incrementally compelling streaming offering as key to further share appreciation. We see potential to further leverage marque general entertainment for both growth and efficiency as undervalued at the current share price,” analysts said.