Warner Bros. Discovery (NASDAQ: WBD) stock experienced a modest decline after CFRA lowered its price target.
Market research firm CFRA has revised its price target for Warner Brothers Discovery (NASDAQ: WBD) shares, lowering it to $10.00 from the previous $11.00 while maintaining a Hold rating. The adjustment factored in a revised risk premium and a TEV/EBITDA multiple of 6.5x, lower than peers of Warner Brothers Discovery.
CFRA analysts voice concerns about the anticipated growth rate and profit for the company’s MAX video streaming service. They suggest it might take longer to achieve accelerated growth and earnings. The firm believes the consensus target price of $13.70 implies a scenario for higher EBITDA growth and profitability, which may be overly optimistic.
Of particular concern to CFRA is the discrepancy between previous expectations and current estimates. A year ago, CFRA anticipated significant EBITDA growth in 2024. However, current consensus estimates fell short of expectations, with projected EBITDA for 2024 at $9.9 billion compared to the actual EBITDA of $10.2 billion reported in 2023. Furthermore, consensus estimates for 2025 indicate less than 5% EBITDA growth, suggesting a dwindling patience from the market regarding Warner Brothers Discovery’s transition of its linear networks to the MAX streaming platform.
In terms of streaming subscribers, Warner Brothers Discovery reported modest gains in the first quarter of 2023, ending the year with 97.7 million direct-to-consumer (DTC) subscribers. However, there was a 5% year-over-year decrease in domestic subscribers, amounting to 52.0 million, while international subscribers saw a 7.8% increase, reaching 45.6 million.
CFRA points out that a potential positive catalyst for Warner Brothers Discovery could be the sale of non-core assets that do not align with its core strategy. This move could help reduce the company’s hefty $43.6 billion total debt.
Warner Bros. Discovery (NASDAQ: WBD) Stock Reaction
WBD stock declined 0.23% to close at $8.72 on Thursday. The traders had exchanged hands with 46,823,811 (46.82 million) shares compared to the average daily trading volume of 25.80 million.
