2024-02-26 03:11:02 ET
Summary
- Warner Bros. Discovery was beaten up by the market when management did not provide specific 2024 guidance.
- The company should see tailwinds from the end of the writers' and actors' strikes, a stabilizing advertising market, and a continued focus on D2C profitability.
- WBD is trading at about half of my fair value estimate and is much cheaper than even its low-growth peers, especially on price/FCF.
- The stock is a Buy for a trade, although the declining linear TV business will be a challenge in the longer term.
Not As Bad A Quarter As The Stock Price Suggests
Warner Bros. Discovery ( WBD ) was destined to have a tough fourth quarter of 2023. Most of the problems were known ahead of time. The SAG-AFTRA actors strike persisted into November, shutting off the content pipeline, and the industry was still recovering from the WGA writers' strike which ended a few days before the start of 4Q. The advertising market also had been sluggish, as was noted on the 3Q earnings call . As a result, revenues for the company were down 7% and adjusted EBITDA down 5% compared to 4Q 2022. On the bright side, free cash flow was strong at $3.3 billion....
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Why I Doubled Down On Warner Bros. Discovery