Warner Bros. Discovery, the Hollywood giant formed through a mega-merger, has been focused on making its streaming business profitable and reducing its debt. After the release of its second-quarter results, which saw a streaming loss of only $3 million, and management’s announcement of a post-merger cost-savings target of over $5 billion, Wall Street has been closely watching the company’s progress.
While several analysts expressed confidence in Warner Bros. Discovery’s improvements and future prospects, one analyst downgraded the stock rating. As of mid-day Thursday, the conglomerate’s shares were down 1.2% at $12.40.
Bank of America analyst Jessica Reif Ehrlich maintained her “buy” rating and $21 stock price target for Warner Bros. Discovery. She highlighted the company’s second-quarter performance, which showed streaming as essentially breakeven. Reif Ehrlich also praised the company’s strong cash flow and remained optimistic about its long-term potential.
Guggenheim expert Michael Morris also expressed positivity, maintaining his $18 stock price target and “buy” rating. He noted that the profitability outlook remained consistent, with management expecting it to reach the lower end of the $11-$11.5 billion range. Morris highlighted the company’s execution of synergy efforts and its clear path to achieving $5 billion or more in cost savings.
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Wells Fargo analyst Steven Cahall echoed the positive sentiment, maintaining his $20 stock price target and “overweight” rating. He commended Warner Bros. Discovery for managing to generate adjusted EBITDA, free cash flow, and reduce debt. Cahall emphasized the company’s strong content from HBO and Warner Bros., noting that it had numerous options for future growth and success.
TD Cowen analyst Doug Creutz reiterated his “outperform” rating and $19 price target for Warner Bros. Discovery. He acknowledged the company’s continued execution against its financial targets.
However, CFRA Research analyst Kenneth Leon downgraded his rating from “buy” to “neutral” and lowered his price target on Warner Bros. Discovery shares. Leon explained that while the company was making progress towards higher growth and profitability, it was at a slower pace than expected.
UBS analyst John Hodulik remained “neutral” on Warner Bros. Discovery shares, with a $15 price target. He highlighted the company’s progress in reducing its debt and its better-than-expected EBITDA and free cash flow. Hodulik also noted that streaming was near breakeven in the second quarter, likely due to library deals.
Overall, analysts have expressed varying levels of optimism about Warner Bros. Discovery’s performance and future prospects. While some remain bullish on the company’s potential, others are more cautious due to the pace of its progress. However, Warner Bros. Discovery’s efforts to make its streaming business profitable and reduce its debt have been recognized and praised by analysts.
