3. Warner Bros. Discovery, Inc. (NASDAQ:WBD)
Number of Hedge Fund Holders: 60
Warner Bros. Discovery, Inc. (NASDAQ:WBD) is a media and entertainment company worldwide. It operates through three segments – Studios, Network, and DTC. Wells Fargo has noticed that the shares of Warner Bros. Discovery, Inc. (NASDAQ:WBD) have dropped by 11% in the three sessions following the launch event of their “Max” streaming service. This is in contrast to the media group being down by only 3% and the S&P 500 remaining flat during the same period. Wells Fargo attributed the decline to “churn anxieties” as some HBO Max subscribers will have to download the new app. Despite this, Wells Fargo believes that the negative sentiment towards Max is an overreaction, and the firm’s long-term thesis of deleveraging remains intact. Although the firm has lowered its Q1 DTC net ads forecast from 2M to 1M, with 1.5M domestic ads and 500,000 international losses, Wells Fargo maintains an Overweight rating and a $20 price target on the shares as of April 14, ahead of Warner Bros. Discovery, Inc. (NASDAQ:WBD)’s upcoming Q1 report.
According to Insider Monkey’s fourth quarter database, 60 hedge funds were bullish on Warner Bros. Discovery, Inc. (NASDAQ:WBD), compared to 61 funds in the prior quarter.
Artisan Value Fund made the following comment about Warner Bros. Discovery, Inc. (NASDAQ:WBD) in its Q4 2022 investor letter:
“Warner Bros. Discovery, Inc. (NASDAQ:WBD) is a global media and entertainment company that is the result of the 2022 merger of Discovery and WarnerMedia. Warner is known for its theatrical releases, networks (CNN, TNT, TBS) and pay television network HBO and related over-the-top streaming service HBO Max. The legacy Discovery business distributes content across US and international networks—such as HGTV, Discovery, TLC, Food Network and Animal Planet—as well as its own streaming service Discovery+. We believe the total portfolio of content and entertainment assets should provide a compelling direct-to-consumer offering to attract viewers and the scale to invest in original content. There is a lot of opportunity, but there’s also uncertainty related to the merger’s integration and realized cost synergies. These questions, in addition to a challenging macro environment for advertising and foreign exchange headwinds, have been overhangs on the stock price.
Further, media and entertainment stocks have come under pressure due to skepticism about the industry’s long-term economics. Our view is streaming is a scale and intellectual property business that will result in a few large winners, and we believe HBO Max will be among this group. WBD looks like a bargain, selling at a double-digit FCF yield.”
