Warner Bros. Discovery Stock Up After Earnings, Disney Plus Bundle Deal

Warner Bros. Discovery (WBD) stock is higher in afternoon trading Thursday as investors parse the company's first-quarter earnings report and news of a streaming bundle offer with Walt Disney (DIS).

In the three months ended March 31, Warner Bros. Discovery's revenue decreased 7% year-over-year to $9.96 billion. Its per-share loss of 40 cents from a loss of 44 cents in the year-ago period. 

Free cash flow (FCF), which is the cash remaining after a company has paid its expenses, interest on debt, taxes and long-term investments to grow its business, showed a major improvement, coming in at positive $390 million compared with negative $930 million a year ago.

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"We are pleased with our progress in the first quarter as evidenced by strong results in important KPIs," Warner Bros. Discovery CEO David Zaslav said in a statement. “Importantly, we once again delivered strong free cash flow, even in our seasonally weakest FCF quarter."

The Q1 results came up short of analysts' expectations. According to CNBC, Wall Street was expecting revenue of $10.2 billion and a loss of 24 cents per share.

The bright spot for Warner Bros. Discovery was its Max streaming unit, which saw revenues increase "modestly" to about $2.5 billion, driven by a 69.9% increase in advertising revenue to $175 million. The unit added 2 million subscribers from the prior quarter to bring its total to 99.6 million.

"We will soon be rolling out Max to 29 countries across Europe, and the content lineup for Max over the coming year is one of our strongest ever," Zaslav said. "Warner Bros. Pictures also had a strong start to the year as the first studio to reach $1 billion in both overseas and global box office, and they have a great slate in the works."

Warner Bros. Discovery and Disney unveil streaming bundle

Another potential growth driver for Warner Bros. Discovery is the new streaming bundle offer that includes Max and Disney's Disney Plus and Hulu platforms. 

The deal was announced Wednesday, May 8, and will be available in ad-supported and ad-free plans. 

The bundle creates the "opportunity to drive incremental subscriber growth," said Zaslov in today's earnings call, adding that "this product will help increase retention and lower churn, and thus support higher customer lifetime values." He added that the bundle will be available this summer.

Where does WBD stock stand with analysts?

Warner Bros. Discovery shares have had a rough 2024, down 30% so far. Still, analysts are bullish on the communication services stock. 

According to S&P Global Market Intelligence, the consensus analyst target price for WBD stock is $13.01, representing implied upside of more than 60% to current levels. Meanwhile, the consensus recommendation is Buy.

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