WBD - Warner Bros Discovery: Max Your Profits - Initiating With A Buy

2024-05-28 15:31:35 ET

Summary

• Warner Bros. Discovery reported 1Q24 earnings, showing consistent debt reduction and improving profitability in the Direct-To-Consumer segment.
• The Direct-To-Consumer segment, including HBO Max, saw an increase in subscribers and revenue; I expect this to continue with management's bundle strategy.
• I think Warner Bros Discovery is hitting a turnaround moment this year and see an attractive buy opportunity near its 52-week-lows.
• I share my thoughts on Warner Bros Discovery here and why I think it has an upside in 2024 and 2025.

Investment thesis:

Warner Bros. Discovery ( WBD ) reported 1Q24 earnings earlier this month. I’m initiating the stock with a buy rating based on two factors I see playing out simultaneously: 1. Consistent debt reduction, and 2. Improving profitability in Warner Bros Discovery's Direct-To-Consumer or DTC segment is an impressive milestone, considering others in the streaming peer group, e.g., Disney ( DIS ) and Paramount ( PARA ), struggle to achieve that. I attribute the former to management’s disciplined execution on debt since the merger in 2022 and the latter to the booming Max business....

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