Warner Bros Discovery shares slide 10% on $9.1B networks unit write

-- Warner Bros. Discovery reported Wednesday a wider second-quarter loss after taking a $9.1 charge in its networks unit following the loss of lucrative NBA media rights. 

Warner Bros Discovery Inc (NASDAQ:) tumbled nearly 10% in Thursday's premarket trading.

The Australian regulated foreign exchange platformentertainment company reported a loss of $4.07 a share on revenue of $9.71. Analysts were expecting a loss of $0.19 on revenue of $10.07B.

The wider loss comes as the company took a $9.1B hit from its networks segment amid "continued softness in the U.S. linear advertising market, and uncertainty related to affiliate and sports rights renewals, including the NBA."

Content revenue decreased 6%, driven by a 27% plunge in EV TV revenue as pressured by lower licensing sales. 

Global DTC subscribers were 103.3 million at the end of Q2, an increase of 3.6 million subscribers versus Q1. Global DTC average revenue per user was $8.00, up 4% in constant currency sequentially in Q2.

The company pledged, however, to pursue new bundling opportunities, with "the goal to get Max on the devices of more consumers faster," adding that it was "seeing clear evidence that these and other actions we are taking will help drive segment profitability in the second half of the year and into 2025 and beyond."

In a post-earnings note, KeyBanc Capital Markets analysts said WBD's Q2 "was a bad quarter, and likely to cause a sharply negative stock reaction tomorrow, as we were early in calling the bottom on estimates."

However, they remain optimistic that Studios can recover in 2025, anticipate that direct-to-consumer (DTC) revenue will exceed $1 billion, and believe that cost-cutting and DTC growth could offset the decline in advertising and distribution revenue in Networks.

"With the stock indicating at <$7.00 after-hours, WBD trades at just 5.5x our '25 adj. EBITDA, which we would argue already discounts the recent poor performance of the Studio business, secular challenges in Network, and gives limited credit to DTC profitability improvement."

Separately, analysts at Third Bridge shared notably more pessimistic remarks.

"Last summer Barbie brought back pink but now Warner is seeing nothing but red," they wrote.

"A massive write-down and declining revenues across all major segments have alarm bells ringing at the beleaguered media giant as Warner Bros Discovery struggles to find a good path forward."

Yasin Ebrahim contributed to this report. 

 

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