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Warner Bros. Discovery's stock price, already in the dumps, fell 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 doesn't show — the full-year 2024 forecast.
The lack of a number “challenges confidence,” Guggenheim Partners' Michael Morris said in a note, leaving the stock at $8.50 late.
“The results aren't great,” he noted on CNBC, but that's not surprising. “I think people are surprised now by the lack of full-year guidance for 2024. It is the company that has historically provided formal guidance for the year ahead. On a call with analysts after the numbers, CEO David Zaslau and CFO Gunnar Wiedenfels “talked about a number of quality factors, but without that level of commitment, it's hard for investors to commit.”
With shares in the tank so far, Morris has bought the stock up to a 52-week range of $16.
WBD brass has been saddled with heavy debt since the merger of Discovery and Warner Media closed two years ago. It has been paying off increased free cash flow in the last quarter.
Advertising is down 14% as linear TV viewers and advertisers continue to drift. Streaming lost money in the quarter, but was profitable for the full year. The TV studio felt a drag from last year's Hollywood strikes, which halted production. The film studio was in bad quarters. News of a sports package with Disney and Fox didn't give the stock a bump. Of the potential deals, the CEO said “we like what we have” and the bar is set very high. The company was kicking the tires on Paramount.
On a call with analysts, CEO David Zaslau said the company has an “aggressive plan” for 2024. But investors want a number.
TD Cowen's Doug Creutz headlined his Reax to the Morning – “Studio pulls 4Q results; The administration did not provide clear 2024 guidance. He noted that management provided “a fair amount of directional commentary.” He has an “outperform” rating on the stock with a price target of $15.
“We understand 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 move the functionality and economics to streaming. “But somebody has to say at some point, 'This is what we think we're going to do next year.'”
