Warner Bros. Discovery (NASDAQ: WBD) stock price has plummeted to a record low as concerns about the company remains. It plunged to a low of $8.6 on Friday valuing the media giant at over $21 billion. The company had a market cap of over $50 billion when it went public a while ago.
Concerns about growth remainsWarner Bros. Discovery is facing the same problems that Paramount Global is facing. It owns tens of television networks in an era when most people are no longer watching television. For example, it owns brands like Cartoonito and Cooking Channel even as key audience turns to YouTube and TikTok.
Further, the company’s streaming service is not big enough to compete with Netflix and Disney, which have hundreds of customers globally. Paramount, which is in acquisition talks, is in the same situation as it is spending millions of dollars on content that is not doing well. The two companies also have a mountain of debt in a high-interest-rate environment.
The most recent results showed that Warner Bros. Discovery is not doing well as its top and bottom line figures missed estimates. Its total revenue came in at $10.2 billion, a 6.58% YoY decline from the same period in 2022. It missed estimates by $131 million.
WBD is also not yet profitable as the company continues spending substantial sums of money in content creation. Its EPS came in at minus 13 cents.
On the positive side, the management is still reducing debt as it seeks to hit its post-merger target. It has reached $4 billion in savings and paid over $5.4 billion. Still, at $40 billion, WBD is one of the most indebted companies in the media space. It is trading at 3.9 times EBITDA.
On a positive side, the management has paid the problematic variable debt and it has no meaningful maturities. It is expected to pay $18 billion in 2024 followed by $3.1 billion in 2025, and $2.3 billion in 2026. These are well-managed payments.
The challenge for Warner Bros. Discovery is that it owns many TV stations, which will struggle to gain meaningful viewership in the coming years. Besides, most people, especially the young, are no longer interested in TV networks like CNN, Animal Planet, and Destination America.
The other major challenge is that its streaming solutions will struggle to compete with its bigger competitors like Netflix and Disney+.
Warner Bros. Discovery stock forecast
The weekly chart shows that the WBD stock price has been in a strong bearish trend in the past few months. It recently crashed below the key support at $8.83, its lowest level in January 2023. The shares have crashed below all moving averages, signaling that bears are in full control.
Further, the stock has remained below the descending trendline shown in black. This trendline connects its highest swings since May 22. Therefore, the outlook for the stock is bearish, with the next point to watch being at $5. This means that the company could become a penny stock in the coming months.
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