Warner Bros. Discovery, the media conglomerate formed by the merger of WarnerMedia and Discovery Inc., experienced a significant drop in its stock price following the release of its Q4 earnings report. The report revealed both positive and negative aspects of the company’s financial performance, leading to a 9% decrease in its stock value.
The company’s shares plummeted as markets opened on Friday morning, with a 10% drop just two minutes after trading began. This decline continued throughout the day, with shares closing at $8.75, down from the previous day’s closing price of $9.56.
One of the key areas of concern highlighted in the earnings report was the weakness in advertising sales. Warner Bros. Discovery’s CEO, David Zaslav, acknowledged this issue during the company’s conference call with Wall Street analysts. He reassured them that despite the current challenges, the long-term outlook for the company remains strong. Zaslav attributed the weak advertising sales to the new management team still working through inherited issues since taking over in April 2022.
The Q4 earnings report also revealed a 7% decrease in revenue for the quarter. This decline was partly due to lost TV revenue resulting from production delays caused by strikes in the previous year. Adjusted earnings were down 5%, primarily impacted by a 30% adjusted EBITDA loss at the Warner Bros. studio and an 11% decline in the linear networks group, which includes popular channels like CNN, TNT, Discovery, Food Network, and HGTV.
However, there was a positive aspect to the report as well. The streaming unit, which houses Warner Bros. Discovery’s Max streaming service, showed improvement compared to the previous year. It delivered a $55 million adjusted EBITDA loss, marking a $162 million improvement from its performance in Q4 2022.
Despite the challenges faced by Warner Bros. Discovery, Zaslav highlighted the company’s efforts to strengthen its financial position. He emphasized their focus on paying down debt, achieving a healthy balance sheet, and driving free cash flow. Zaslav also expressed confidence in the company’s leadership team and their ability to navigate through the current difficulties.
The decline in Warner Bros. Discovery’s stock price is reflective of its performance over the past year. The company’s shares have dropped by 46% in the last 12 months and are down by 18% year-to-date.
While the Q4 earnings report revealed weaknesses in advertising sales and certain business segments, Warner Bros. Discovery remains optimistic about its long-term prospects. The company’s efforts to address inherited issues and focus on financial stability position it as a healthy entity with a strong leadership team. As the media landscape continues to evolve, Warner Bros. Discovery will need to adapt and innovate to regain investor confidence and drive future growth.
