Shares of media giant Warner Bros. Discovery (WBD) dropped about 11% in yesterday’s extended trading session after reporting a massive second-quarter loss of $10 billion. This was primarily due to a $9.1 billion write-down of the value of WBD’s cable networks.
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WBD reported weaker-than-expected results on both top and bottom line fronts. The company delivered an adjusted loss of $4.07 per share, which was higher than analysts’ expectations of a loss of $0.27. It also compared unfavorably to the loss of $0.51 per share in the year-ago quarter. Moreover, WBD’s Q2 revenue declined 5% year-over-year to $9.7 billion and missed consensus estimates of $10.27 billion.
Key Challenges in Q2
The company’s cable channels, including CNN, TNT, and TBS, witnessed a major impact as more traditional TV viewers abandoned cable for streaming. This resulted in a decline in WBD’s advertising revenues and distribution fees in Q2.
Additionally, WBD faced a significant setback when it lost the broadcasting rights for the National Basketball Association (NBA) games to key rivals, such as Walt Disney (DIS), Comcast (CMCSA), and Amazon (AMZN). It should be mentioned that Warner Bros. Discovery is currently suing the NBA over the deal.
In contrast to the TV business, WBD’s streaming unit showed growth. The company’s global subscribers increased 7% year-over-year to 103.3 million during the quarter. Also, the average revenue per user increased by 3% to $8. However, this growth was not enough to offset the losses incurred in the television business.
Is WBD Stock a Good Buy?
Overall, WBD’s Q2 results reflect the impact of the broader industry shift from traditional television to streaming. The company’s ability to successfully navigate this transformation will be crucial to its long-term success. Nevertheless, WBD’s focus on reducing debt and entering strategic partnerships, such as the streaming bundles with Disney, might support its performance.
On TipRanks, WBD has a Moderate Buy consensus rating based on 10 Buy, six Hold, and one Sell ratings. The analysts’ average price target on Warner Bros. stock of $12.50 implies an upside potential of 62.13%. Shares of the company have declined 32.3% year-to-date.
