Warner Bros. Discovery share price, already in the dumps, has tumbled another 11% this morning after the company’s latest quarterly numbers showed weak linear advertising and a struggling studio. But the clincher for investors may be what it didn’t show — a full-year 2024 forecast.
The stock is scraping $8.50 late morning as the lack of a number “challenges confidence,” said Michael Morris of Guggenheim Partners in a note.
“The results themselves were not great,” he noted on CNBC, but not all that surprising. “Where I think that people are surprised right now is the lack of full-year 2024 guidance. This is a company that has historically provided formal guidance for its coming year.” On a call with analysts after the numbers, CEO David Zaslav and CFO Gunnar Wiedenfels “talked about a number of qualitative factors, but without that quantitative commitment, it’s hard for investors to make the commitment” either.
With the shares so far in the tank, Morris has a buy on the stock with a 52-week range of up to $16.
WBD brass has been touting turnaround since the merger of Discovery and Warner Media closed two years ago, saddling the combined company with heavy debt. It’s been paying that down free cash flow, which rose last quarter.
Advertising fell 14% as linear TV viewers and advertisers continue to waver. Streaming lost money for the quarter but was profitable for the full year. The TV studio felt a drag from Hollywood strikes last year, which shuttered production. The film studio had a bad quarter. News of a sports bundle with Disney and Fox didn’t give the stock a bump. On potential deals, the CEO said “we like what we have” and the bar is very high. The company had been kicking the tires on Paramount.
On a call with analysts, CEO David Zaslav said the company has an “attack plan” for 2024. But investors want a number.
Doug Creutz of TD Cowen titled his reax to the morning — “Studio Drags On 4Q Results; Management Opts Not To Give Explicit 2024 Guidance.” Management did offer “a fair degree of directional commentary,” he noted. He has an “outperform” rating on the stock with a price target of $15.
“We understand that the environment is challenging,” Morris told CNBC. “We see consumer behavior and advertiser behavior. In the case of Warner Bros. Discovery, they have a plan” – to migrate activity and hopefully economics to streaming. “But somebody at some point has to say, ‘This is what we think we will do in the comping year’.”