On September 13, 2022, entertainment and media giant Warner Bros. Discovery, Inc. (WBD) laid off 100 employees from its ad sales department as part of its cost-saving measures. Furthermore, the company’s mammoth loss in its second quarter has generated negative investor sentiment.

Over the past month, the stock has lost 5.5% to close the last trading session at $12.09. It has lost 49.1% year-to-date and 54.7% over the past year.

Here is what could shape WBD’s performance in the near term:

Bleak Bottom-line Performance

WBD’s total revenues increased 220.9% year-over-year to $9.83 billion for the second quarter ended June 30, 2022. However, its net loss came in at $3.42 billion compared to an income of $672 million in the previous period. Also, its loss per share came in at $1.50, compared to an EPS of $1.01 in the year-ago period.

Negative Profit Margins

WBD’s trailing-12-month gross profit margin of 45.90% is 9.1% lower than the industry average of 50.52%. Its trailing-12-month EBIT and net income margins of negative 1.38% and 14.32% are lower than the industry averages of 9.27% and 5.73%, respectively.

In addition, its trailing-12-month ROCE, ROTC, and ROTA of negative 8.98%, 0.24%, and 1.95%, compared with the industry averages of 6.66%, 3.58%, and 2.47%, respectively.

Unfavorable EPS Estimates

Analysts expect WBD’s EPS to decline 154.2% year-over-year to negative $0.13 for its quarter ending September 2022. Moreover, its EPS is expected to fall 128.7% year-over-year to negative $0.50 in 2022. The stock missed EPS estimates in all four trailing quarters. 

POWR Ratings Reflect Bleak Prospects

WBD has an overall rating of F, equating to a Strong Sell in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

WBD has a D grade for Quality, consistent with its lower-than-industry profitability margins.

In addition, it has a D grade for Growth and Stability, in sync with its bleak bottom-line performance in its latest reported quarter and beta of 1.38, respectively.

In the 16-stock Entertainment – Media Producers industry, WBD is ranked last. The industry is rated F.

Click here for the additional POWR Ratings for WBD (Value, Momentum, and Sentiment).

View all the top stocks in the Entertainment – Media Producers industry here.

Bottom Line

WBD reported a dismal bottom-line performance in its last reported quarter. Moreover, the stock’s EBITDA declined at a 9.7% CAGR over the past three years. Given the grim analysts’ expectations, WBD might be best avoided in 2022.

How Does Warner Bros. Discovery, Inc. (WBD) Stack Up Against its Peers?

While WBD has an overall POWR Rating of F, one might consider looking at its industry peer, News Corporation (NWSA), which has an overall B (Buy) rating.

WBD shares were trading at $12.09 per share on Monday afternoon, up $0.11 (+0.92%). Year-to-date, WBD has declined -52.59%, versus a -23.06% rise in the benchmark S&P 500 index during the same period.

About the Author: Riddhima Chakraborty

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...

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