Warner Bros. Discovery downgraded after 'ugly' quarter

Bernstein has downgraded Warner Bros. Discovery (WBD) to Market Perform from Outperform, citing a "long road to recovery" after an "ugly" quarter.

Yahoo Finance Senior Reporter Alexandra Canal joins Catalysts to dig into its latest earnings report and break down how legacy media companies are struggling with their linear businesses.

For more expert insight and the latest market action, click here to watch this full episode of Catalysts.

This post was written by Melanie Riehl

Video Transcript

Bernstein moving to the sidelines on Warner Bros Discovery after what the firm called an ugly quarter, the analyst downgrading the media stock to market, perform from out perform young finances, Alexander now is here.

Hey, Ma Burnstein, essentially downgrading the stock after last week's earnings, they called it a quote ugly quarter.

Let's be honest, it was very ugly.

We saw misses on both the top and bottom lines, a massive $9.1 billion in charge of related to its TV networks unit following the loss of those critical and B A media rights.

So that basically devalues the linear networks, which is something that we saw from Paramount Global as well.

And it just speaks to the larger challenges that a lot of these legacy media companies are dealing with as their linear networks are basically are in free fall at this point while they're also trying to make streaming profitable.

And speaking of that WBD did report a reversal of earlier profit trends in its streaming business.

Despite adding 4 million subscribers in the quarter, we also saw free cash flow for 43% year over year.

So just consistent bad news across the board here and all of that did send the stock down by double digits.

After that report, shares actually touched their lowest levels since the 2022 merger, they're down about 40% since the start of the year.

Now, there are other firms out there like Key Bank, for example, which think the stock is attractive, these cheap levels.

We do have shares trading below seven bucks at this point.

I keep bank analyst brain and this be he said it's quote, unlikely things can get worse from here.

And that in 2025 we should see more improvements in streaming along with the studio side of the business.

But for now that there's not a lot of to be desired here.

When it comes to Warner Brothers, discovery is going to take an investor that is a very patient if you want to get in the game now, which is why Bernstein wants to remain on the sidelines at this point.