Tesla (NASDAQ:TSLA) stock marked a stellar recovery in 2023, rising about 61% year-to-date. While EV (Electric Vehicle) giants’ solid recovery makes it one of the best-performing stocks, Warner Bros. Discovery (NASDAQ:WBD) shares, a member of the S&P 500 index (SPX), have soared more than 63%, outperforming TSLA so far this year.
WBD’s outperformance came despite stiff competition and a weak advertising market. Let’s dig deeper to understand what fuelled this rally.
Here’s Why WBD Stock is Rising
WBD has completed most of its restructuring initiatives, which will accelerate its growth and reduce costs. Further, the price hike announced earlier this year gave a lift to shares of this media and entertainment giant.
However, the most significant catalyst has been the combination of HBO Max and Discovery+, which will likely improve its go-to-market approach, strengthen its competitive positioning, drive engagement and cost synergy, and position it well to capitalize on the recovery in the advertising market. The company plans to launch the combined service in a few months.
In addition, WBD’s diverse revenue streams and management’s efforts to achieve profitability in the DTC (Direct-to-Consumer) business augur well for growth.
Needham analyst Laura Martin sees WBD’s multiple revenue streams, margin expansion upside, focus on franchise-based films, and cost-cutting initiatives as positives. However, the ad revenue decline and macro weakness remain a drag. Martin has a Hold recommendation on WBD stock.
What is the Prediction for WBD?
While WBD stock has gained over 63% year-to-date, analysts’ average price target of $18.56 implies a further upside potential of 19.97%. At the same time, it has received five Buy, three Hold, and one Sell recommendations for a Moderate Buy consensus rating.
Our data shows that hedge fund managers are also optimistic about WBD stock. Per the TipRanks’ Hedge Fund Trading Activity tool, hedge funds bought 4.2M shares of WBD last quarter.
Bottom Line
Its growing DTC global subscribers, the combination of HBO Max and Discovery+, and cost efficiencies will likely support the upside in WBD stock. However, the near-term pressure on ad revenues, especially in the U.S., and global macro uncertainty could hurt its financials in the short term.
