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Warner Bros. Discovery (NASDAQ:WBD) has discovered a brand new low, slipping 14.5% within the wake of a second straight post-merger earnings report exhibiting the difficulties of revamping the media enterprise.
These outcomes mirrored the promoting problem confronted by most media names within the second half of 2022, together with macroeconomic worries, although analyst reactions ran the gamut relying on various long-term outlooks for the corporate as CEO David Zaslav appears to show it round.
On the bearish aspect of reactions was Rosenblatt Securities, which has a Promote ranking on the inventory and took the chance to trim its value goal to $8 (implying 22% draw back).
The agency acknowledged the positives in elevated merger synergies that the corporate signaled (it now expects $3.5B in profit, in contrast with $3B earlier than), however “the significant offset is that macro pressures have stepped up materially and quickly in TV promoting.”
Wells Fargo’s Steven Cahall is on the sidelines till visibility improves. Warner Bros. Discovery is seeking to deal with worsening natural developments by specializing in profitability in direct-to-consumer and people further merger synergies, he mentioned.
“There’s in all probability extra scope for earnings upside at WBD as a result of these synergies, however with gross leverage at 5.4x there’s additionally restricted tolerance for the corporate to overlook the ’23 steering and the macro makes all the pieces really feel shakier,” he added. “It is also doubtless not till H2 2023 that the (direct-to-consumer) proof factors come by.” He is Equal Weight however trimmed the worth goal to $13 from $16.
Evercore ISI’s Vijay Jayant is bullish, sticking with an Outperform ranking and $25 value goal. “Whereas we count on an incremental headwind to 2023 numbers from the macro surroundings, we don’t see a change to the corporate’s long-term free money movement technology,” Jayant wrote.
Most corporations aren’t offering 2023 steering amid the macro uncertainty and “we see the truth that WBD is offering steering as constructive, even whether it is considerably hedged,” Jayant mentioned.
And Credit score Suisse’s Doug Mitchelson is upbeat, specializing in the lessening of merger danger in citing an Outperform ranking and $36 value goal (implying a sturdy 251% upside). Sure, the advert market has softened, and foreign money impacts are notable together with accelerated wire slicing.
However pulling the mixed HBO Max/Discovery+ streaming launch ahead into spring 2023 is nice information, and the outcomes have been “fairly cheap” total. “We proceed to see long-term upside to Warners because it leverages its content material management place, drives price synergies, and reduces debt leverage.”
On the corporate’s earnings name, CEO David Zaslav held forth on the heavy content material modifications forward, together with a concentrate on franchises and a dim view of direct-to-streaming films.
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