Warner Bros. Discovery Reports Q3 Results, Stock Surges 11.8%

Warner Bros. Discovery's stock surged 11.8% despite weaker-than-expected Q3 revenue of $9.6 billion. The company outperformed EPS expectations, driven by strong direct-to-consumer subscriber growth. However, a projected loss for FY2024 could pose challenges ahead.

Date: 31-01-2025

AI Rating: 6

Financial Performance Overview
Warner Bros. Discovery, Inc. (WBD) is currently valued at a market cap of $25.6 billion. Over the past year, WBD shares have underperformed, rising only 4.4% compared to a notable 22.6% gain in the S&P 500 Index. Additionally, on a YTD basis, WBD is down slightly, contrasting with the S&P's 2.7% rise.

The company reported weaker-than-expected Q3 revenue at $9.6 billion but notably exceeded earnings expectations with an EPS of $0.05. This performance, despite a decline in revenue, was a positive surprise compared to analyst forecasts. Investor sentiment appears positively impacted by a significant sequential increase in DTC subscribers by 7.2 million and an 8% year-over-year rise in DTC revenues. Furthermore, DTC advertising revenues surged by an impressive 51%, indicating strong growth in this segment.

The company is also focusing on debt reduction through repayment and repurchase efforts, which assures investors about financial stability and may support future growth. However, analysts expect WBD to report a loss of $4.33 per share for fiscal 2024, marking a significant decline year-over-year.

Future Expectations and Analyst Ratings
Among 25 analysts, the consensus rating for WBD is a “Moderate Buy,” slightly more bullish than the previous quarter. This is based on 11 “Strong Buy” ratings and 13 “Hold” ratings. Guggenheim has reaffirmed a “Buy” rating with a $14 price target, highlighting optimism around cash flow and a higher Q4 EBITDA forecast. WBD’s restructuring into two divisions aims to enhance shareholder value and strategic flexibility.

The current trading price is below the mean price target of $12.24, with the highest target sitting at $18, suggesting a potential upside of 72.6% from current levels. Overall, despite some positive performance indicators, the anticipated losses for the next fiscal year may temper investor enthusiasm.

Stocks: WBD