Warner Bros’ and Discovery’s unification into Warner Bros. Discovery (NYSE:WBD) has not come without some issues. In Wednesday’s after-hours trading, Warner Bros. Discovery slipped slightly after a day of modest gains. The biggest reason? Unexpectedly high restructuring charges.
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Originally, Warner was expecting those pretax restructuring charges to run between $3.2 billion and $4.3 billion. However, a recent SEC filing saw those numbers increase substantially, with a new range of between $4.1 billion and $5.3 billion. This figure includes between $2 billion and $2.5 billion for “strategic content programming assessments.” That includes such things as the complete cancellation of the “Batgirl” movie, which was around $90 million worth of spending at its cancellation.
Further included in the huge new cost profile were employee severance, “facility consolidation activities,” the end of production in several European countries, and the loss of 36 titles from the HBO Max catalog. The loss of new production might sound like a serious problem. However, current CEO David Zaslav notes that the company has a “strong foundational offering,” which should give it the start it needs. With a $53 billion debt load to address, cost-cutting was likely only a matter of time.
Warner is in a fairly good position with analysts currently. The company has a Moderate Buy consensus rating, with Buy and Hold ratings in a nearly-even split. Additionally, Warner also has an average price target of $18.75, which gives it upside potential of 70.77%.
