WBD

Why Warner Bros. Discovery Stock Was Falling Today

Shares of Warner Bros. Discovery (NASDAQ: WBD) were heading lower today after the video entertainment giant posted disappointing results in its fourth quarter as revenue and profits both declined, missing estimates on the top and bottom lines.

As a result, the stock was down 11.2% as of 9:44 a.m. ET.

A couple watching TV on a couch.

Image source: Getty Images.

Warner Bros. Discovery still needs help

Ever since the company was formed by the merger of AT&T's WarnerMedia and Discovery Communications in 2021, the company has underperformed as it's struggled with a bloated debt burden, questionable management decisions, and a lack of any growth strategy. The fourth-quarter earnings report did little to convince investors that any of that had changed.

Revenue in the quarter fell 7% to $10.28 billion, which was slightly below the analyst consensus at $10.34 billion. At its studios segment, revenue was down 17% to $3.17 billion due in part to the Hollywood strikes; it fell 9% to $5.04 billion in its networks segment as the cable subscribers continue to cut the cord, and its direct-to-consumer streaming segment saw revenue increase just 3% to $2.53 billion, helped by its acquisition of BluTV.

Warner Bros. Discovery's results on the bottom line were also underwhelming, as its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) profit fell 5% to $2.47 billion. On a generally accepted accounting principles (GAAP) basis, its per-share loss improved from $0.86 to $0.16, but that still missed estimates at a per-share loss of $0.07.

CEO David Zaslav touted the improvements in debt reduction and cash flow generation, but that was not enough to counteract the overall negative trend in revenue and EBITDA.

Can WBD recover?

Warner Bros. Discovery didn't offer specific guidance for 2024, but the company gave encouraging remarks, saying it was on track to achieve at least $1 billion in direct-to-consumer EBITDA by 2025. Management also said the advertising business is improving.

Overall, however, the company is still failing to deliver on the promise of the merger and capitalize on the most impressive collection of intellectual property in the entertainment industry outside of Disney.

It's not surprising to see the stock flailing after today's news, given the declines in revenue and EBITDA profit.

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Jeremy Bowman has positions in Walt Disney. The Motley Fool has positions in and recommends Walt Disney and Warner Bros. Discovery. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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