Discovery of Warner Bros. (white blood cells) reported Q4 . earnings results that missed on the board on Thursday – but one analyst said strategic plan of the company reflects another familiar media giant: Disney’s (dis).
“The strategic location outlined by WBD CEO last night reflects DIS’s diverse revenue streams, focus on franchise-based movies, multiple DTC applications, profit expansion, etc,” wrote Needham analyst Laura Martin in a new client note published on Friday.
“The two main advantages of WBD as we see it are: a) deeper cost cuts thanks to AT&T’s prior ownership; and b) WBD owns video games, not Parks, which have a higher ROIC and targeting younger consumers. DIS is rated higher than WBD, recommending multiple expansions if WBD’s implementation is successful,” she continued.
Zaslav emphasis on income call The company’s intellectual property will be a clear driver of the company’s success, announcing a new production deal for more “Lord of the Rings” films, as well as continuing to focus on improving The DC Universe and upcoming streaming initiatives (a press event scheduled for April 12 will reveal more details about the HBO Max/Discovery+ relaunch.)
In terms of games, Zaslav said video games are “at the core” of his strategy after the Hogwarts Legacy sold more than 12 million units for $850 million in revenue in its first two weeks since launching. launch: “As the only studio to scale the game, we see it as a meaningful differentiator and a significant opportunity.”
Martin, who maintains a Hold rating on the stock with a price target of $15.73 a share, said Zaslav is “repositioning WBD as a ‘storytelling’ company – similar to DIS, ” while adding his commitment to free cash flow and capital allocation will continue to drive reverse valuation.
Shares, which initially fell as much as 4% after the release, traded relatively flat on Friday as investors took in the positive analyst commentary, along with Zaslav’s upbeat tone.
Tough decision ‘starts to make economic sense’
Warner Bros. Discovery only added 1.1 million paying users in the fourth quarter despite HBO Max return to Amazon Prime video channels (AMZN), in addition to the launch of popular original series such as “The Last of Us”, “The White Lotus” and “House of the Dragon”.
That number missed consensus estimates, despite a loss in the direct-to-consumer sales division of $217 million — a $511 million improvement from last year.
The struggling media giant also announced it will adjust its $3.5 billion cost savings aggregate targets to $4 billion over the next two years, including $2 billion in savings for the year. now. That would come with a $5.3 billion restructuring cost.
“This promises to be a very exciting year for our company,” Zaslav told investors. “Much of our restructuring is behind the scenes…we’re a company now.”
Macquire analyst Tim Nollen agreed the company is “turning around” in a new note published on Friday: “The big picture from the WBD’s Q4 report is a heavy upgrade for the board. Last year’s mergers and acquisitions were done and while the macro headwinds are still blowing, the tough decisions being made are starting to make economic sense.”
Nollen maintained his Outperform rating on the stock, but raised his price target by 10% to $22 a share.
Guggenheim analyst Michael Morris added that he sees higher streaming capacity ahead of the HBO Max/Discovery+ relaunch: “We see investor confidence in the streaming service becoming increasingly attractive. Leads are key to the stock’s further appreciation.”
“We see the potential to further leverage the composite entertainment brand for both growth and performance when undervalued at current stock prices.”
Similarly, Morris maintained his Buy rating, raising his price target to $18 per share — up from $16.50 previously.