It was down 2.5% in premarket trading on Monday, but recovered quite a bit throughout the course of Monday morning’s trading.
I’m bullish on Warner Bros. Discovery. The streaming market has taken some hits since the world reopened in the days after the pandemic. However, Warner has a lot to like in its lineup, and its willingness to change for the sake of shareholders shouldn’t be overlooked.
The last 12 months haven’t been kind to Warner Bros. Discovery. The company has lost nearly half its value in that time, going from $38.85 a year ago to around $21 today.
The latest news is equal parts terrible and hopeful. Investors are “digesting the news” that Warner’s CNN+ streaming operations will be shutting down on April 30. This despite the fact that CNN+ only started existing on March 29.
Wall Street’s Take
Turning to Wall Street, Warner Bros. Discovery has a Moderate Buy consensus rating. That’s based on four Buys, two Holds, and one Sell assigned in the past three months. The average Warner Bros. Discovery price target of $36.67 implies 74.4% upside potential.
Analyst price targets range from a low of $20 per share to a high of $48 per share.
Investor Support Recalibrating
Right now, the picture is somewhat incomplete as far as investor support goes. This is mainly because Warner Bros. Discovery is still a comparatively new firm.
While Warner Bros. has been around for decades, and Discovery was a popular media company in its own right, the merger deal that brought the two together only concluded about two weeks ago.
Insider trading results are well known, and a reason to be encouraged. Buyers currently lead sellers 17 to 14 when it comes to Warner Bros. Discovery stock.
Retail investors are over the moon for Warner Bros. Discovery stock. In the last seven days alone, portfolios containing the company’s stock are up 7.9%. It’s even better when the last 30 days are measured, as investment is up 19.5%.
A Hopeful Disaster
A company that’s basically two weeks old doesn’t have a lot of time to generate news, but boy, did Warner Bros. Discovery do just that. The biggest issue facing the company right now was the cancellation of CNN+, a streaming media service that focused not so much on news, but on lifestyle programming.
The trend, however, didn’t bode well. While early projections had the service up and running nicely with between 100,000 and 150,000 subscribers in its first few weeks, the number of daily active viewers cratered. In the first two weeks after the service’s launch, it had fewer than 10,000 daily active viewers.
Many wondered why the company wouldn’t hold out for six months, or even three, to give the service time to find its footing and let the marketing sink in. Reports noted that the issue was one of strategy; CNN+ simply didn’t fit the company’s overall strategic plans, and therefore, it was shut down immediately.
That could be interpreted as a sign of weakness. After all, reports note that Warner Bros. Discovery spent about $100 million to market CNN+, which is better than the costs spent annually to market all of CNN in general. Not giving the platform so much as one entire quarter to gain ground can make Warner Bros. Discovery look indecisive and wasteful.
Another interpretation, meanwhile, fits with earlier-revealed information: the company is so remarkably decisive that it’s willing to go forward with its plans at any cost. That’s even so when it’s already sunk nine figures into promoting a project it shut down a month later.
There are a lot of factors to consider in Warner Bros. Discovery. While it certainly took some hits after Netflix’s disastrous earnings reveal, the news is much less dire at Warner. That’s largely due to its sheer diversification.
Already, some analysts are encouraging investors to simply “forget the first quarter financials.” The bigger measure will be where the company is going, which is reasonable enough given that the merged company has only about a month’s history to it.
Warner has its studio arm. That’s good news, thanks to a post-pandemic move away from “all streaming all the time” and a move back to movie theaters.
The streaming arm is still doing well as HBO and HBO Max continue to add subscribers, backed up by Warner’s line of intellectual property.
Warner even looks good by the numbers. It’s trading well under its highest and average price targets, much closer to its lows, which means an excellent potential buy-in point. There’s support from retail investors and insiders alike.
It’s nicely diversified and most of its businesses are coming back online in full measure. That’s why I’m bullish on Warner Bros. Discovery, a company that has a lot going for it, and an excellent potential path forward before it.
Discover new investment ideas with data you can trust.