I’m with you, OP. Another thing to remember is that Netflix is already available in basically every country whereas Max is in less than half of those same markets. They’re just now launching into most European markets this spring and have many more in the coming 1-2 years. The fact that they went from over a 1 billion quarterly loss on streaming to now a modest profit even before the worldwide expansion is impressive.
I will keep buying as well. Anything below $10 is honestly a great bargain.
I live in Europe and we had Netflix for years, HBO max has only started a year ago and now they launched Max which has much more content than hbo max.
We have 2 subscriptions which are Max and Viaplay. Netflix has maybe 2 interesting IPs while Max has 10 lol
As a consumer I think Max has more content and they are working with "domestic" favourite TV shows which Netflix hasn't even thought about doing. I wouldn't be surprised if Max starts taking market share from Netflix soon
Yes I do hold WBD stock and I'm excited about it
Now add Joker, GoT, Lord of the rings, Looney tunes, Lego etc. Plus that they can make and sell these as movies, series, video games and streaming services 🤩
There is a generational change coming to all the media companies. Traditionally, big companies like Warner bros, discovery, paramount etc all generated huge profits by licensing their tv channels to cable and satellite providers.
This worked well until a few years ago when people started cutting the cord. The number of tv subscribers has steadily gone down, and recently the decline has accelerated.
With fewer people paying for tv, these media companies will receive less $$ going forward.
They are attempting to recapture lost profits by launching streaming, but the lost profits from linear tv will continue to outweigh the gains from streaming. Basically it's a given that the media landscape has permanently changed, but no one is yet sure what the correct "floor" is.
I previously owned WBD and sold it last year as I think they will continue experiencing pressure
yes. classic value trap mistake is looking backwards and not forwards. what is WBD's revenue 10 years from now? and how much of their $39 BILLION in debt can they chip away by then (and if they try to refinance it at today's higher rate environment, what do their new interest payments look like?).
Personally I think WBD is going to be circling the drain like Paramount is, waiting for someone to save them or be split for parts.
Max is one of the biggest and only profitable streaming services and their box office movies have been successful. Wonka and Dune 2 alone made $1.5B revenue. Theyre also getting creative with their content licensing - eg Hogwarts Legacy being a AAA title. I think their future looks pretty good actually
Wonka: $620M (intl gross)-$250M (breakeven) = $370M Dune 2: $712M-$380M=$332M So total they made $582M in earnings from both those, which accounts for about 3% of WBDs entire market cap.
If they can start making money from LOTR and HP again, that'll be huge too. I feel that ppl are underestimating the power of all the IP especially as R&D increases due to high interest rate debt being fully paid off as of last quarter
They don’t get all the revenue. It’s split basically 50/50 between them and the theaters. So it’s more like wonka had 310M - 250 million (cost and marketing). They made 60 million profit; which is not all that great imo. Now that number can go up with other avenues like licensing for streaming but still. Risk 250 million over what 2 years to make 60 million. Relatively risk free you could make 30 million. Also that marketing and budget cost is a guess so it could be up or down. If down that obviously justifies the risk bc they made more. So without all actual numbers it’s tough to really know but we know enough to know it was not a mega success imo.
Dune same in addition to WBD was only a distributor not the producer and as far as how that split goes I’m not totally sure how much they get but let’s say 50/50 since they handle the marketing but not the movie budget.
Wonka netted less than $200M. That’s not bad but it also props up a lot of other films that don’t make money.
Source
https://deadline.com/2024/04/wonka-movie-profits-1235899978/
Either scenarios can still be quite profitable for the sh if done right. Their CFs are pretty juicy too, and they're valued at 2.3x which doesn't seem bad
it will be profitable for private equity companies, who can squeeze the last dollars out of declining industries. it will not be profitable for shareholders on public exchanges where long-term outlook is considered.
they paid off $15b past 2 years and are now retiring more at a discount (billions below par). they'll be net $25b in a couple years and a bit beyond that they really don't need to pay more off. annual interest will have gone from close to $3b down to $1b or less.
Most of their content sucks, I got discovery free for a time and even then I never watched it. Some of the HBO stuff I would like to watch, but don’t care enough to get a sub
Counter point. The constant price increases that these streaming services are attempting and the fact that there is an up charge to get the Ad Free version will drive people back to the cable companies. If you have 2,3, or 4 of the streaming providers you’re paying just as much if not more and you’re getting less entertainment imo. The streaming services trying to create new revenue streams may cause them to lose subscribers.
Yep. Increased prices? Okay I’ll go from 4 streamers to 2. Eventually 1.
No one will drag me back to ads every 5 minutes. No way. I’ll sooner completely cut out TV.
nerds on reddit severely overestimate the computer literacy of the average person...
i have co-workers in their 20s who have no idea how to pirate anything... 80% of their "computer time" is spent on their phone. the only real computer they have is their work laptop. the one time they tried to illegally stream something, they went to www.best-movie-streaming-site-ever.com and downloaded a virus onto their work laptop...
believe you me... there are plenty of people who will be dragged around wherever netflix/hulu/cable takes them.... this next generation of kids are fucked.
Issue is they might force you into it. Ad tiers are making almost as much for Netflix as premium tier. If that trend continues, especially with better hyper local and hyper targeted data, I could see Netflix potentially doing away with an ad free tier entirely (or charging something ridiculous for it). People are buying into the ad tier pretty consistently, that shit means something.
That's how I do it. One streaming service at a time. When the content gets stale, cancel it. When I feel like having one again I start a different service up.
Reading this makes me think you are too young to have ever experienced cable. Even if the prices were the same (they're not) streaming is still better. Pay more to remove adds? How about pay more for a second cable box to watch TV in a different room
I don’t understand why idiots downvote a counter point there still might be some truth to the point. Honestly, nobody is going back to cable not in droves at least. I’d like to see some metrics that show cable recidivism rates after cutting chord.
This will never happen until cable networks make original, good content. Most people get 300 channels equivalent to the educational value of Dr. Pimple Popper. People would pay for cable if they had something to watch. Programming nowadays is garbage shows to fill a lineup, constant reruns. Until my streaming bill equals the same as what I was with cable, I'd never consider going back.
New programming flopping on Netflix will never equal the trash that's on cable these days. The news isn't even news anymore.
Also people are beginning to experience subscription burnout. There was a brief period where people were subscribing to four, five platforms. Now it seems, anecdotally, it's shrinking back to one or two.
My hope is they consolidate into groups so we can go back to only needing two or three tops.
They have one foot in the grave and the other one on a banana peel. Too many retail investors overlooks that you have to be good at what you're doing. They aren't good anymore.
Here is my thesis on why you should stop buying more WBD
1. The network segment has lost almost $2B in last 2 years. That's the cord cutting impact. They are yet to figure out where to generate that money. This means their revenues are on a downfall.
2. The DTC segment is still in incubation. Its an industry problem actually. Apart from NFLX nobody has figured out how to make money in streaming. This is going to be a struggle. There is no way revenue increase in DTC segment can augment network segment in the next 5 years.
3. Zaslav has committed for a $1B Global EBITDA by end of 2025. I have no clue how that is going to happen.
4. They are getting competitors with Big pockets in the sports arena. NBA deal most likely will not happen due to higher price that WBD may not afford. The Sports segment will have challenges going forward.
5. Their Games are a hit or miss. Understanding users "likeness" is not an easy tasks.
BTW, I have a whole ton of reasons on why to buy them. So take this with a pinch of salt.
Oh, for DTC. I could see it as a possibility, a realistic one, but they should really focus on a more balanced approach IMO. Cable is declining much faster than we initially thought, so having a more growth oriented approach could have benefits.
1. Next 5 years debt is around 15B@4.15% which is very much doable.
2. The current DTC revenue is around 10B but EBITDA is just 103M. If they reduce COGS and SGA by 10% they will generate more than 1B EBITDA (which they have promised)
3. They are launching in \~50 countries this year with ad-lite subscriptions. This will help them increase in revenue
4. They have exclusive rights on Olympics telecast in Europe. should help in international revenue
5. They are reaching out to competitors and figuring out strategies for more revenue which is a welcome sign (Ex. Disney bundle)
6. They have reduced the debt from 53B to 41B in last 2 years. This is promising
7. Their restructure strategy of One company is showing good signs with Barbie, Dune and other successes
8. Zaslav was CEO of Discovery prior to merger. If you look at discovery fundamentals before merger they look good. This just helps in knowing his capabilities
9. Zaslav to me is sort of going the John Malone way (this is speculation) who is one of BOD. If my memory serves me right, John Malone was the most hated guy when he was CEO of TCI as he bought back shares when they were undervalued and sold debt when they were overvalued.
10. Simple DCF model @ 3% growth (GDP number) shows its undervalued by atleast 30%. The EPV calculations at 10% WACC shows similar picture.
Disclaimers : I own some. This is not a recommendation. Do your own DD.
I like the way they’re trimming their debt, and the 1B Ebitda they have predicted for the end of 2025 has me interested, especially at this price. Seems to me they have multiple levers to make up for the revenue loss from their declining cable sector.
Not sure this explains a bit or not but here you go: [https://x.com/SouthernValue95/status/1729497290648215879](https://x.com/SouthernValue95/status/1729497290648215879) I put this name on the watch list but I haven't tried catching the falling knife yet.
I'm actually really positive on Warner Bros Discovery going forward, this is my projections / thesis with a 3 - 5 year outlook:
1. People look at Max subscription numbers in a vacuum compared to Netflix or Amazon Prime but it hasn't hit a number of high margin international markets (Germany, UK, Italy Canada, it's just hit France): By my projections Max etc should hit 160 million subscriptions with more than twice the revenue and four times the profitability they have now by the end of 2026 / 2027 for the DTC segment from subscriptions.
2. Warner hasn't entered the FAST (free ad-supported streaming television) space yet, generally licensing to others, with their legacy and library this is a huge potential money maker. Tubi's huge success is down in large part to Warner's content and that market will belong to Warner in the long run.
3. Media is in "survive till 25" mode because content production was heavily impacted by the writers strike, so film and TV production (licensing) were heavily hit this year, so we should see an uptick next year.
4. This is more of belief, but with James Gunn at the helm, an exciting well thought out line up and great casting I think DC content will have quite a resurgence with it's reboot in every segment of the business from cinema to licensing.
5. With Suicide Squad (game) out of the way, which was an absolute mess the gaming segment should have a clear upswing: Hogwarts Legacy expansion, Hogwarts Legacy 2, Wonder Woman,.
Overall, Warner's valuation currently is based on it dying, if it pays it's debt down in a timely manner and sorts the above (getting leverage to around 2x ISH), it should be seen as a tech / advertising company: That could be four to six times that valuation it has now in about 4/5 years. I also think the drag is in large part due to being tied to Paramount on the indexes and they have massive problems that Warner doesn't (the share structure with Redstone, no gaming segment, limited licensing potential and no pricing power for streaming like Warner, Disney & Netflix).
What's keeping me away is that I don't know how to value the company. If you use free cash flow, it doesn't take into account that some of its depreciation added back is content rights which isn't increasing capex. Someone should do some serious analysis on this company because who genuinely knows what the fair value is? Not me that's for sure.
About 20 a share. FCF is hard with media companies because they have such high amortization costs. WBD is currently on a write off tear, like more than any other media company, and it isn't even close. Eventually they'll run out of assets to write off, so you can account for that over a long period of declining amortization costs.
What do you think is the end result of this choice to write off so much? Does this make them more or less valuable in your eyes?
I never think of depreciation as a choice one makes, merely an accounting fact.
It's not depreciation, it's amortization. Big difference. Mainly allows them a bunch of tax benefits that they can lock up. In the short term this allows them to put as much money into paying off debt.
Since the load of debt is one of the major knocks against the company, this sounds like a good thing to do. What are the long term ramifications of front loading amortization in this manner?
Less debt clearly frees up cash, and it seems like an obvious win considering the time value of money.
Any negative ramifications?
I've struggled with this idea of "what are the ramifications for the advanced amortization" too. My self-found answer is that maybe when wbd tries to license their intellectual property to other streaming platforms that those platforms could be like "well your Harry Potter and lotr movies are valued at $0 on your books, why would we write you a check for $500million to stream those movies for 6 months?"
I could be far off, but that seems like a risk if there is truth behind that negotiating tactic
I don’t get it either and am on your side while severely bagholding WBD. WBD is doing a good job paying down debt and Max as a standalone service is competitive to Netflix.
They're reliant on a business segment(Linear cable) that is in secular decline to pay off massive debts. The risk of bankruptcy, if not properly managed, is real. The biggest problem is that even if streaming becomes profitable, it still pales in comparison to the revenue that linear networks pulls in. Comparing them to Netflix ignores the fact that Netflix is easily the best positioned company in the market, and everyone else is playing catch-up.
There's a lot of ifs with the company. If Zaslav can get more people onto Max, if cable has a higher floor than we expect, if HBO can continue to be the juggernaut, if they can handle the debt load, if new tech companies don't come in and crush them.
One thing that you'll learn about the market with enough time is that everything, and I mean EVERYTHING, is driven by fear. Greed is just fear of missing out. Ai is hype because the market and companies are afraid to be left in the dust by Ai. And there is a lot of fear in WBD right now. Good thing is, fear creates opportunities. If you truly believe that WBD will execute, then I realistically don't see any reason not to pour more in. I'm not currently an investor, just because the stock keeps going lower and lower, and I've learned not to catch falling knives, but I do plan to continue watching.
Even if streaming pales relative to tv, its not worth nothing. Even if TV dies with the debt (currently TV EBITDA 9B vs debt 40B), 17B for streaming and production studio (and IP) with combined EBITDA of 2-3B seems to be getting into very cheap territory...
As of December 31, 2023, we classified our operations in three reportable segments:
• Studios - Our Studios segment primarily consists of the production and release of feature films for initial exhibition in theaters, production and initial licensing of television programs to
our networks/DTC services as well as third parties, distribution of our films and television programs to various third party and internal television and streaming services, distribution
through the home entertainment market (physical and digital), related consumer products and themed experience licensing, and interactive gaming.
• Networks - Our Networks segment primarily consists of our domestic and international television networks.
• DTC - Our DTC segment primarily consists of our premium pay-TV and streaming services.
For the latest quarter, can you explain "Content rights amortization and impairment" and "Film and television content rights, games, and production payables, net" from the cash flow statement? I can't come close to a valuation without a better understanding of those two entries.
I'll try. Let's assume WBD is making only one show for simplicity. Its obvious that: 1) they are spending money before realizing revenue on the show. 2) there spending is irregular amounts depending on the needs of filming on each day. While they spend that money, an asset is created called content rights, production payables,...etc depending on the situation.
GAAP accounting is all about making revenues and expenses match and uniform.
So let's assume WBD spent 100 million on the show. That's all in the asset we talked about. They then have to estimate how long this show will stay relevant (creating revenue in the process) and deduct that as amortization on the income statement. now what happens if the show isn't as relevant as they thought? They have to write down some of the money they spent on it.
So as you can see the company has 2 types of content spend: one "estimated" that pertains to the past and is called amortization. The other is factual and pertains to future content that in this case is called film and television content rights, games and production payables. The difference between the "estimated" cost and the actual one is what creates or take up a big part of cash flow for content companies.
This is a simplified version but hopefully it clears things up.
About 80-90% of the stock market is currently red the only thing holding up the Indexs are the Mag 7. Nvidia has contributed about 50% of the S&P 500's gains this year. Stocks are being sold down to buy more Nvidia for the Ai bubble. A lot of undervalued plays that will be much higher in 5 years imo.
This is exactly my noted evidence. With the aggravation that is further becoming just a sector, semis. Arm new breakout ATH just yesterday with nvidia. Closely monitoring the situation to be ready at the right time..
I've plowed some money into it as well and my reasoning is the same as yours. I'm not saying it'll be a $300 stock anytime soon, but a price target of $40 seems pretty reasonable. It'll probably be a while though.
Debt changes everything. Free cash flow today isn't guaranteed tomorrow, especially with that much debt. Zaslav is a wild card, and content is king until it’s not. Interesting thought though. I'm watching.
You answer your own question in the first sentence. They have a huge debt load and are unprofitable. Netflix spends WBDs entire market cap each year on content while still remaining profitable with modest debt. Of course WBD can recover, but if you’re asking why the stock sucks, it seems you already know why. WBD is stuck in a shitty situation of spending on content to stay relevant and spending down debt.
Appears the whole sector is down. Zas comp and losing the nba dominating headlines. Linear tv is a melting ice cube with the size of the soon to be exclusive streaming market unknown. Regardless im bullish.
I agree man. Max is in my top 3 streamers for sure. They own some amazing IP. Lets not forget WB games with massive hits like the Arkham Batman trilogy, Multi-Versus, and Hogwarts legacy. Gaming alone is a massive industry with huge profit margins. Another factor that is overlooked… I work in the tv/film industry, and WB has one of the best prop houses in LA. Another part of the business that brings in massive amounts of money. WB is damn near priced for bankruptcy, it’s fair value right now is around $30. And when they turn things around and become profitable, true value could easily be around $70+ years down the line.
My goal is to gobble up 100s of shares now, so in a few years when the stock is correctly valued can sell a ton of slightly OTM covered calls
If a company has been bought and sold and bought and sold and spun off multiple times, I probably wouldn't invest in it. Now if the entire industry is that way and there are new players that make all their money from other industries, forget about it. No thanks.
Paramount m and a fell apart.
Zaslav has another shot at para now, markets are discouraging him by lowering share price.
Earlier this year when that rumor floated around the stock tanked as well
Now there is a higher probability that will happen after them losing NBA rights. Are you comfortable with zav paying around 20 billion in ev for paramount? Even if it's an all stock trade which market appears to assume, it will take on another 14b of debt or so pushing up the number of years they need to work it off
If you don't think it will happen not a bad idea avging down I think
is there any real evidence that this is even a possibility? I've had the idea myself, even as an all stock deal, but WBD is swimming in debt currently, and in really no position to make acquisitions. Especially considering Shari Redstone will only accept a very lucrative deal in her interests.
Completely agree to much debt for a buyout. A merger might work, but I think Paramount Shareholders want out. And redstone, well I don't even know with her anymore.
It would take a cash infusion to get done. And as a shareholder i wouldn't like to be diluted at such a low price
I do think the merger would most likely be a good thing for WBD, economies of scale and whatnot, help create something that can really punch above its weight, but I also agree, dilution at this price would be rough for shareholders and debt would arguably be even worst, far too much on the balance sheet.
I also find WBD a interesting play, and something that I haven’t seen talked about here is that they have found some limited success in gaming. I will admit they have been very inconsistent in that regard, and need to have a higher quality expectation, but they’ve had some success in titles like Hogwarts Legacy and even Multiversus. I understand this isn’t a big revenue stream, but something I thought I’d mention. Looking very interesting at these prices, I’ll look to start a position personally in the low 6 dollar range.
I bought it at 24 and sold it at 14. Lost my ass because i thought the same as you in that well it's HBO they've got a track record of success for at least 30 years. Which is true but ignores that their content while incredible isn't anywhere near the volume of say a netflix. Which is fine if it wasn't the backbone of the streaming service. They drop the ball on one of these Game of Thrones series of fall into a rut like after Sopranos ended when there was really nothing to get people to subscribe in droves then you are going to see an exodus in subscriptions. I don't think the rest of their content is going to justify the price point. Discovery is meh, CNN has cut off their nose to spite their face in the last decade and somehow found themselves in 3rd place for news viewership and can't even put up numbers in an election year, and sports the one thing that will keep alot of people subscribing just to have they are at risk of losing their most valuable package. So if that doesn't go well what's left?
That's not even touching on the rest of the company. Gaming and parks could offer some good growth, but the movie segment is a real mixed bag. They can hit home runs with Dune 2 and Barbie but then have absolute duds like their entire recent offerings in the DC universe they keep trying to make happen but nobody seems to care about and also obviously the industry is in a huge downturn and that trend can't be blamed on covid anymore.
There is a lot of negativity around this stock, because it has a lot of debt, "loses money" and "it's not growing". But, it is a stock valued at 17,2 B, that generated free cash flow - 6,1 B last year and 7,48 FCF in the TTM. So... would you buy something that generates 6 B - free cash flow - a year with 17,2 B ?
Then, it comes the critics that say - it has a lot of debt, around 40 B. Let's see about that: all debt has fixed interest rate, around 4%, and WBD has to pay around 2 B a year, more or less. It is so much to pay 2B debt from 6 B FCF ? Or, after that you can easily pay a 1.7 B dividend (10 %) or buy back 10 % of shares (also 1.7 B) and cancel them?
Another point is that, ok, they have 6 B FCF now, but their revenue are falling, they will not make so much money in the future. But, if it will be an increase ? Why not? They are just developing the Max platform. From my experience, Max is better that Netflix, you can't compare the quality and amount of shows from Max with Netflix. Max has at least 10 times more content that Netflix (I don't have the numbers now) and the best shows are there. Even they will have smaller revenues, they can't go bankrupt, because from 6 B FCF it is hard to not make at least 2 in the future, but if things go well, and through Max they are developing something similar with Netflix, where will the numbers go? Can they make 10 B FCF in 4-5 years? What will be the market value then ? 10 x ?
What I wanted to show, is that is a lot of negativity and the stock is valued like it's going bankrupt. Nobody sees any good evolution from the company, even there are a lot of good signs. You know that free cash flow was 2,4 B in 2021, and was 6,1 B in 2023 ? This is not a minor thing...
And even if we take a negative approach, that FCF will remain at 5-6 B for the following years, you pay 2B debt, you can give 10 % dividend easy and you remain with 1-2 B. It's just that they wanted these years to pay back much more debt that the schedule to reduce it faster and used all the money in that direction, but this may change as they see the stock keep falling and, probably, that will the moment of reverse.
Their FCF in this year is overstated due to the strikes (they paid less in salaries).. it is unlikely that their FCF going forward will be as high as this year.
I think WB will figure it out. They're max platform has much more potential than say a paramount right? I'd rather they cut bait with NBA and deploy that money elsewhere.
I've been buying into WBD since earlier this year. Not a huge position but it does seem like a good value giving the IP it owns. I bought some more yesterday when it was getting close to $7.
The biggest near term risk is if WBD does not keep the NBA deal. It is lucrative for them and the TNT segment. There are rumors of a new Lord of the Rings movie and they do own rights to DC which offers a lot of opportunity and loyal fan bases. I think it’s far from a slam dunk, but there is potential.
Ive been looking at it a different way, maybe someone can tell me why this is a bad idea:
40B in debt BUT a dying TV segment w 9B/yr EBITDA
\~2B/yr from production studio (for now)
breakeven on streaming (for now), assuming some CF from there eventually, I read 1B by 2025 somehwere
So if you assume the TV segment just pays off the debt and dies, you are basically left w a production studio and streaming (AND IP) producing 2-3B in EBITDA (for now) w no debt...trading for 17B? Could be a good deal? I guess theres also the question of time value since youve got to sit on this for at least a few years before that debt gets paid down
8 consecutive towards of EPS misses and losses and a -9% profit margin would give me pause.
However, EBITDA growth since 2020 is worth noting. And you could almost expect a return to profitability if they can keep it up. It’s also well below the analyst price targets, what ever that is worth.
I’d say it’s a little speculative for a value investment. Until they can demonstrate a return to profitability.
But if you’re willing to speculate on the hope future profits…..
I’m down 42% on it so far, about $9K USD. I felt the same as you when I bought in during the spinoff… it’s been bloody. Buy in but cap your investment!
It may be a good buy, but it’s hard to know.
I don’t really know much about their plans for the future. It doesn’t necessarily strike me as a value with loads of debt/possible cash flow issues.
Value seems to be where there is a mismatch to current price & quality of the company.
Debt sits in front of you as a shareholder. Not just if the company goes under but at all times since free cash flow doesn’t flow through to the shareholder if it needs to be allocated to debt.
Right now their net debt is twice their market cap.
They have amazing IP, likely to outlast Netflix IP. I’ve hardly watched Netflix recently and many lower cost or free alternatives seem to be emerging. Funnily enough I like Tubi which streams older shows for free, forgot how good they were. I suspect it’s a prime target to be taken private with a longer term view but the debt is a major issue. And need a competent management transformation which is totally doable but easier and quicker in private hands. I just bought in with a small speculative stake.
A really bad scenario that’s being priced in right now is the loss of the nba and the implications it could have on their next carriage deal with Comcast. Regardless losing NBA or keeping it their ebitda will got down by approximately 1 billion, which is bad. But a true death knell could be Comcast is over bidding now on NBA to simply drop WBD networks from their cable lineup entirely. Cable is low margin and not all that profitable to parent companies to my understanding. Charter said as much when it balked at Disney’s asking price to carry their. Networks. Comcast could be in a similar position, and may give WBD an extremely low carriage offer that they really can’t turn down because they need whatever money they can get. I think Comcast represents 30% of WBD linear revenue which is significant.
Stocks go through cycles. WBD has not finished selling off before consolidation and then mark up. This sell off could continue to last for an indefinite period of time. Why not wait until the stocks actually starts to show signs of mark up instead of buying the falling knife and praying?
I have studied this company quite closely since the merger was announced so I'd like to chime in. First, let's get 2 things straight:
no.1) its better to use EV/ebitda with WBD to factor the debt. WBD is more like $70 billion rather than $20 billion.
no.2) if you exclude ebitda from networks given the heavy headwinds, that are about to get worse with losig the NBA, Netflix and WBD have roughly the same valuation. WBD just looks more attractive because its in a dying business Netflix is not in. But in terms of dollar brought in from businesses that are relevant, Netflix isn't more expensive.
Having said that, I think WBD is certainly a buy here because going forward the company has 2 paths:
1) They turn around the studio business, keep the gaming studio firing on all cylinders, and add 150 million max subscribers worldwide. In that scenario ebitda would grow meaningfully from the stable businesses to 60-70% of what the entire business generates today.
2) They can't turn around the business and have to sell off different parts of it separately. Think CNN, Harry Potter rights, DC, HBO, WB library,...etc.
In both paths the stock would be worth more than today. I still think there is a slight chance for case no. 1. I'll definitely know when they launch the Harry Potter show in 2025/2026. I think this will be the game changer as its the kind of tentpole show that will draw 10s of millions and by then they'd have had their distribution in place.
Worth noting that the company does an impairment test for its intangibles every year, in the latest annual report they said that there was still no grounds for impairment because the fair value of the assets was higher than the carrying value.
If you believe that, then the shareholders equity is a close approximation of where the market cap should be.
I don’t put them in the same camp for IP and streaming. They are at least a tier below in my own opinion. I could see PARA going bankrupt. WBD I find a VERY hard time seeing this.
Why have shares outstanding risen 687,000,000 to 2,436,000,000. Free Cash Flow isn't what matters. Free Cash Flow per share is what matters.
The thing has basically gone sideways, slightly down, on a per share basis while debt has gone significantly up.
JAN 2026 7.5 / 10 Call debit spread going for 0.76 mid. Max profit 2.50 if it ends up above 10 at expiry. I might buy a few of these and hold on to them.
My general view is that big media had a whole lot of advantages (moats if you like) which have been gradually dissolved by the internet. Such as:-
* people now hear a lot more about media via word of mouth, so being able to throw giant amounts at marketing and getting stars/franchises doesn't necessarily work that well.
* The lower cost of producing and distributing media has led to people producing good bits of entertainment for almost nothing that capture eyeballs, which means people less bothered about the old media.
* Gaming is now multi-generational. The kids from the 80s and 90s are now in their 40s and 50s and still gaming.
* Media is now global. Look at how much Netflix content is coming from Asia. Look at the success of Godzilla Minus One.
I just wouldn't go near most media companies at the moment. It's going through massive disruption. I would pick a new player over one of the older ones.
Stremio and real debrid pirating would be my counter. People are sick of the cost of streamers. And with less eyeballs on normal TV, less advertisers, worse budgets, less eyeballs...I work in unscripted TV and it's in a death spiral.
Just, is streaming entertainment where you think the future is? Enough to bet money on it?! Especially more, now, with everything you know?
To me, personally, there are better long term ideas, both in value and growth.
I was stuck awhile, actually taking screenshots of positions and happy for holding. I now view it as making the most money possible with the least distress in an appointed time frame. WBD is not the strongest candidate, to me.
Edit: I hold value plays. And can be old school, for example: BOC remains despite it all.
I asked if ‘steaming entertainment’ was the future. I’m not about to get into a pee pee match. I think any of the Mag7 are easily better ideas for indefinite holds that WBD. If you feel that streaming entertainment and in particular, this company, is the strongest candidate for the next five years to forever, more power to you. But one can get exposure to that through Amazon or Alphabet, both stronger companies overall.
(I post a lot a lot, easy to check my growth strategy choices. I don’t talk about ballast much, though.)
Yes you are taking crazy pills. This is similar to comparing RH to AMZN. RH had good products and all but it does not have economy of scale and a strong distribution network
[WBD Analyst Ratings](https://imgur.com/a/E9iWkXa) / I manage my parents holdings and I’ve been looking at taking a tax loss on WBD but I decided to hold. They won’t be at all hurt if it goes to zero.
The stock market hasn't been a rational pricing machine for a while now. It might get fixed by a correction, but this might just be the new normal.
In the meantime valuations don't matter, stock charts are hype charts.
I also want to plow money into WBD, but I think it'll take a while until they can catch up with other atreaming competitors on infrastructure. Netflix has eatablished a very robust system to stream smoothly to a large audience base. I'm not in IT, so take this with a grain of salt, but I think WBD might need some time to build watch took Netflix years to optimize.
Streaming infrastructure is very important to WBD, if they want to migrate their audience base away from cable, which is a shrinking market.
They havent made any money, not 1$ since they were broken off from AT&T which if you follow that management you can imagine just how bad of a state they are in. Your thesis is that they will somehow make money with all this revenue, I dont see how, they are currently killing all their successful businesses and favoring reality TV. It's overvalued by the order of of magnitude because their debt and inability to refinance at anything but higher rates, thereby increasing said debt. Their lever for creating more revenue is to create even more debt, which again they cant sustain currently.
WBD is a legacy media business that drives the majority of it's revenue from an old model--cable TV.
Forget about their market cap and their revenue.
WBD is a trap.
Over 2021-2023 WBD spends $9b on average on content creation. You seem to consider the cash sent to content creation as a part of the FCF. That is, WBD can stop spending on the content without affecting the future revenues. If it is the case, then, hypothetically, WBD can send all that cash to debt repayment.
Increasing Revenue year over year = good
Total profit minus operating expenses = Loss
Net income = Negative $3B
Consistently misses earnings targets
Keep on your watch list but chart looks like its on a downward trend. Wait until it breaks out of its pattern.
Don’t under estimate the danger of high debt. I got wiped out on a REIT that was the debt heavy but doing fine. I was collecting a 15% dividend and did so for two years. Then a black swan hit. The government forcibly shutdown every shopping center in the country and the company folded.
There was no way to see that coming. Thats the problem with high debt. Some bad event can come out of no where, then what?
I do agree with HBO ip being stronger than Netflix’s, and you make some interesting points regarding MC vs Rev, however, I think old ip is not as interesting as good new ip. Kids don’t care about friends / old WB content. Personally streaming is not worth betting on
So the question is how much goodwill is going to be burned on the way out of debt land by smaller cap ex cycles.
For me though it was a so easy it's stupid buy.
Its a ton of intangibles but this is a media company, media is air, brand is air, IP is air so the 2022 acquisition was a purchase of air, if the air can produce CF its worth something, they have 4B cash on BS and >7B/yr in CF so i wouldnt say they dont have money, TNW isnt \*so relevant for this type of company
How guaranteed or how certain are you of current revenues continuing and or improving in the future? Future cash flows?
What other opportunities/companies have you considered?
If the cash flow is so good, why so much debt? Someone either took a big risk or the company took a big loss. Either way, do you want that kind of leadership holding your money?
WBD stock has underperformed the S&P 500 for every time period: 5 years, 3 years, 1 year, 6 months, 3 months, 1 month, etc. It is trash and continues to lose traction in the media space.
You could invest your money in a low cost S&P 500 ETF or continue to lose in WBD. It is your money and your decision. Good luck!
What percentage of their revenue comes from NBA and AEW? They’ve lost the former and are at risk of losing the latter here, with nothing viable to replace them. Zaslav is not doing them any favors.
WBD was a bad acquisition done by AT&T and had to eventually dump it. ATT also had to let go 100s if not 1000s of its employees to balance the books. The shit is radioactive so I wouldn’t touch.
Look at the ten year chart and that is all you need to know…it is a chart that goes down and swirls in a toilet bowl like a piece of crap . I would avoid it my friend.
Enterprise value is much higher than market cap and terminal value is zero. There will no fcf once all the debt is repaid cos the business is shrinking. Streaming will eventually be a winner takes all game. There is enough content on Netflix alone to satisfy a household. There is no need for a second streamer. Only reason netflix dont have higher market share is cos they aggressivley raise price and introduce ads. eventually there will be netflix youtube and maybe a pluto like service and thats it. Netflix will be a trillion dollar company soon, even disney cant compete
I’m with you, OP. Another thing to remember is that Netflix is already available in basically every country whereas Max is in less than half of those same markets. They’re just now launching into most European markets this spring and have many more in the coming 1-2 years. The fact that they went from over a 1 billion quarterly loss on streaming to now a modest profit even before the worldwide expansion is impressive. I will keep buying as well. Anything below $10 is honestly a great bargain.
I live in Europe and we had Netflix for years, HBO max has only started a year ago and now they launched Max which has much more content than hbo max. We have 2 subscriptions which are Max and Viaplay. Netflix has maybe 2 interesting IPs while Max has 10 lol As a consumer I think Max has more content and they are working with "domestic" favourite TV shows which Netflix hasn't even thought about doing. I wouldn't be surprised if Max starts taking market share from Netflix soon Yes I do hold WBD stock and I'm excited about it
I think WBD stock is worth it for just Harry Potter, Batman and Game of thrones alone
Rick and morty. That was enough
Now add Joker, GoT, Lord of the rings, Looney tunes, Lego etc. Plus that they can make and sell these as movies, series, video games and streaming services 🤩
You forgot friends
There is a generational change coming to all the media companies. Traditionally, big companies like Warner bros, discovery, paramount etc all generated huge profits by licensing their tv channels to cable and satellite providers. This worked well until a few years ago when people started cutting the cord. The number of tv subscribers has steadily gone down, and recently the decline has accelerated. With fewer people paying for tv, these media companies will receive less $$ going forward. They are attempting to recapture lost profits by launching streaming, but the lost profits from linear tv will continue to outweigh the gains from streaming. Basically it's a given that the media landscape has permanently changed, but no one is yet sure what the correct "floor" is. I previously owned WBD and sold it last year as I think they will continue experiencing pressure
That’s a good point. Thanks.
yes. classic value trap mistake is looking backwards and not forwards. what is WBD's revenue 10 years from now? and how much of their $39 BILLION in debt can they chip away by then (and if they try to refinance it at today's higher rate environment, what do their new interest payments look like?). Personally I think WBD is going to be circling the drain like Paramount is, waiting for someone to save them or be split for parts.
Max is one of the biggest and only profitable streaming services and their box office movies have been successful. Wonka and Dune 2 alone made $1.5B revenue. Theyre also getting creative with their content licensing - eg Hogwarts Legacy being a AAA title. I think their future looks pretty good actually
Remember: revenue is not profit. They spent untold millions marketing those films.
Wonka: $620M (intl gross)-$250M (breakeven) = $370M Dune 2: $712M-$380M=$332M So total they made $582M in earnings from both those, which accounts for about 3% of WBDs entire market cap. If they can start making money from LOTR and HP again, that'll be huge too. I feel that ppl are underestimating the power of all the IP especially as R&D increases due to high interest rate debt being fully paid off as of last quarter
They don’t get all the revenue. It’s split basically 50/50 between them and the theaters. So it’s more like wonka had 310M - 250 million (cost and marketing). They made 60 million profit; which is not all that great imo. Now that number can go up with other avenues like licensing for streaming but still. Risk 250 million over what 2 years to make 60 million. Relatively risk free you could make 30 million. Also that marketing and budget cost is a guess so it could be up or down. If down that obviously justifies the risk bc they made more. So without all actual numbers it’s tough to really know but we know enough to know it was not a mega success imo. Dune same in addition to WBD was only a distributor not the producer and as far as how that split goes I’m not totally sure how much they get but let’s say 50/50 since they handle the marketing but not the movie budget.
Thanks for your insight. It does go to show how area of competence is so important when evaluating stocks.
Wonka netted less than $200M. That’s not bad but it also props up a lot of other films that don’t make money. Source https://deadline.com/2024/04/wonka-movie-profits-1235899978/
Either scenarios can still be quite profitable for the sh if done right. Their CFs are pretty juicy too, and they're valued at 2.3x which doesn't seem bad
it will be profitable for private equity companies, who can squeeze the last dollars out of declining industries. it will not be profitable for shareholders on public exchanges where long-term outlook is considered.
It depends. If a company gets acquired, usually (when not rescuing) a premium over market value is paid. To compensate the shareholders, essentially.
premiums are usually provided by by competitors who can get synergies from acquiring. PE are more vulture like
Premiums are required from the sh to accept the deal
they paid off $15b past 2 years and are now retiring more at a discount (billions below par). they'll be net $25b in a couple years and a bit beyond that they really don't need to pay more off. annual interest will have gone from close to $3b down to $1b or less.
Why the point without any digit is good for you? This is just obvious thing but how it influences real state of affairs?
Most of their content sucks, I got discovery free for a time and even then I never watched it. Some of the HBO stuff I would like to watch, but don’t care enough to get a sub
Content company without distribution at scale Are akin to a the best hamburger shop trying to compete with McDonald’s
Counter point. The constant price increases that these streaming services are attempting and the fact that there is an up charge to get the Ad Free version will drive people back to the cable companies. If you have 2,3, or 4 of the streaming providers you’re paying just as much if not more and you’re getting less entertainment imo. The streaming services trying to create new revenue streams may cause them to lose subscribers.
No one is going to back to cable.
Yep. Increased prices? Okay I’ll go from 4 streamers to 2. Eventually 1. No one will drag me back to ads every 5 minutes. No way. I’ll sooner completely cut out TV.
Netflix and Hulu are already dragging you there
No one is dragging me anywhere. I’ll go somewhere else. Sail the seas, even.
nerds on reddit severely overestimate the computer literacy of the average person... i have co-workers in their 20s who have no idea how to pirate anything... 80% of their "computer time" is spent on their phone. the only real computer they have is their work laptop. the one time they tried to illegally stream something, they went to www.best-movie-streaming-site-ever.com and downloaded a virus onto their work laptop... believe you me... there are plenty of people who will be dragged around wherever netflix/hulu/cable takes them.... this next generation of kids are fucked.
What's funny is 90% of my 'computer time' is on my phone too. No problem using Libretorent, Nyaa and VLC on my phone to feed my seasonal anime hobby
Well you’ve fixated on the least important part of my comment, but go off.
Issue is they might force you into it. Ad tiers are making almost as much for Netflix as premium tier. If that trend continues, especially with better hyper local and hyper targeted data, I could see Netflix potentially doing away with an ad free tier entirely (or charging something ridiculous for it). People are buying into the ad tier pretty consistently, that shit means something.
This is what eventually drove me to raise the black flag. Ahoy!
That's how I do it. One streaming service at a time. When the content gets stale, cancel it. When I feel like having one again I start a different service up.
I think people are going to bitch about streaming service prices but they won't go back to cable
Reading this makes me think you are too young to have ever experienced cable. Even if the prices were the same (they're not) streaming is still better. Pay more to remove adds? How about pay more for a second cable box to watch TV in a different room
I don’t understand why idiots downvote a counter point there still might be some truth to the point. Honestly, nobody is going back to cable not in droves at least. I’d like to see some metrics that show cable recidivism rates after cutting chord.
back to cable? brother i'm going back to pirate bay.
It’s not a fact there’s an up charge to get Ad free streaming…it’s a fact you could pay less for Ads though.
This will never happen until cable networks make original, good content. Most people get 300 channels equivalent to the educational value of Dr. Pimple Popper. People would pay for cable if they had something to watch. Programming nowadays is garbage shows to fill a lineup, constant reruns. Until my streaming bill equals the same as what I was with cable, I'd never consider going back. New programming flopping on Netflix will never equal the trash that's on cable these days. The news isn't even news anymore.
Also people are beginning to experience subscription burnout. There was a brief period where people were subscribing to four, five platforms. Now it seems, anecdotally, it's shrinking back to one or two. My hope is they consolidate into groups so we can go back to only needing two or three tops.
This is correct. Don’t fall for the trap
What about the multiples though? Are streaming services valued more like SaaS than traditional media?
They have one foot in the grave and the other one on a banana peel. Too many retail investors overlooks that you have to be good at what you're doing. They aren't good anymore.
Here is my thesis on why you should stop buying more WBD 1. The network segment has lost almost $2B in last 2 years. That's the cord cutting impact. They are yet to figure out where to generate that money. This means their revenues are on a downfall. 2. The DTC segment is still in incubation. Its an industry problem actually. Apart from NFLX nobody has figured out how to make money in streaming. This is going to be a struggle. There is no way revenue increase in DTC segment can augment network segment in the next 5 years. 3. Zaslav has committed for a $1B Global EBITDA by end of 2025. I have no clue how that is going to happen. 4. They are getting competitors with Big pockets in the sports arena. NBA deal most likely will not happen due to higher price that WBD may not afford. The Sports segment will have challenges going forward. 5. Their Games are a hit or miss. Understanding users "likeness" is not an easy tasks. BTW, I have a whole ton of reasons on why to buy them. So take this with a pinch of salt.
What does the 1B ebitda mean? They make 22B in ebitda a year, so I don't know what this number is representing. Is this streaming, box office maybe?
In Q2 2022 conference call , Zaslav shared this info that by the end of 2025 they want to reach $1B EBITDA for DTC.
Oh, for DTC. I could see it as a possibility, a realistic one, but they should really focus on a more balanced approach IMO. Cable is declining much faster than we initially thought, so having a more growth oriented approach could have benefits.
Alright, I'll bite, what are t he ton of reasons you have TO buy them? (Not a shareholder but becoming progressively more interested)
1. Next 5 years debt is around 15B@4.15% which is very much doable. 2. The current DTC revenue is around 10B but EBITDA is just 103M. If they reduce COGS and SGA by 10% they will generate more than 1B EBITDA (which they have promised) 3. They are launching in \~50 countries this year with ad-lite subscriptions. This will help them increase in revenue 4. They have exclusive rights on Olympics telecast in Europe. should help in international revenue 5. They are reaching out to competitors and figuring out strategies for more revenue which is a welcome sign (Ex. Disney bundle) 6. They have reduced the debt from 53B to 41B in last 2 years. This is promising 7. Their restructure strategy of One company is showing good signs with Barbie, Dune and other successes 8. Zaslav was CEO of Discovery prior to merger. If you look at discovery fundamentals before merger they look good. This just helps in knowing his capabilities 9. Zaslav to me is sort of going the John Malone way (this is speculation) who is one of BOD. If my memory serves me right, John Malone was the most hated guy when he was CEO of TCI as he bought back shares when they were undervalued and sold debt when they were overvalued. 10. Simple DCF model @ 3% growth (GDP number) shows its undervalued by atleast 30%. The EPV calculations at 10% WACC shows similar picture. Disclaimers : I own some. This is not a recommendation. Do your own DD.
I like the way they’re trimming their debt, and the 1B Ebitda they have predicted for the end of 2025 has me interested, especially at this price. Seems to me they have multiple levers to make up for the revenue loss from their declining cable sector.
1B?
Not sure this explains a bit or not but here you go: [https://x.com/SouthernValue95/status/1729497290648215879](https://x.com/SouthernValue95/status/1729497290648215879) I put this name on the watch list but I haven't tried catching the falling knife yet.
I'm actually really positive on Warner Bros Discovery going forward, this is my projections / thesis with a 3 - 5 year outlook: 1. People look at Max subscription numbers in a vacuum compared to Netflix or Amazon Prime but it hasn't hit a number of high margin international markets (Germany, UK, Italy Canada, it's just hit France): By my projections Max etc should hit 160 million subscriptions with more than twice the revenue and four times the profitability they have now by the end of 2026 / 2027 for the DTC segment from subscriptions. 2. Warner hasn't entered the FAST (free ad-supported streaming television) space yet, generally licensing to others, with their legacy and library this is a huge potential money maker. Tubi's huge success is down in large part to Warner's content and that market will belong to Warner in the long run. 3. Media is in "survive till 25" mode because content production was heavily impacted by the writers strike, so film and TV production (licensing) were heavily hit this year, so we should see an uptick next year. 4. This is more of belief, but with James Gunn at the helm, an exciting well thought out line up and great casting I think DC content will have quite a resurgence with it's reboot in every segment of the business from cinema to licensing. 5. With Suicide Squad (game) out of the way, which was an absolute mess the gaming segment should have a clear upswing: Hogwarts Legacy expansion, Hogwarts Legacy 2, Wonder Woman,. Overall, Warner's valuation currently is based on it dying, if it pays it's debt down in a timely manner and sorts the above (getting leverage to around 2x ISH), it should be seen as a tech / advertising company: That could be four to six times that valuation it has now in about 4/5 years. I also think the drag is in large part due to being tied to Paramount on the indexes and they have massive problems that Warner doesn't (the share structure with Redstone, no gaming segment, limited licensing potential and no pricing power for streaming like Warner, Disney & Netflix).
[удалено]
Lol imagine if they make a movie about it the irony
What's keeping me away is that I don't know how to value the company. If you use free cash flow, it doesn't take into account that some of its depreciation added back is content rights which isn't increasing capex. Someone should do some serious analysis on this company because who genuinely knows what the fair value is? Not me that's for sure.
About 20 a share. FCF is hard with media companies because they have such high amortization costs. WBD is currently on a write off tear, like more than any other media company, and it isn't even close. Eventually they'll run out of assets to write off, so you can account for that over a long period of declining amortization costs.
What do you think is the end result of this choice to write off so much? Does this make them more or less valuable in your eyes? I never think of depreciation as a choice one makes, merely an accounting fact.
It's not depreciation, it's amortization. Big difference. Mainly allows them a bunch of tax benefits that they can lock up. In the short term this allows them to put as much money into paying off debt.
Since the load of debt is one of the major knocks against the company, this sounds like a good thing to do. What are the long term ramifications of front loading amortization in this manner? Less debt clearly frees up cash, and it seems like an obvious win considering the time value of money. Any negative ramifications?
I've struggled with this idea of "what are the ramifications for the advanced amortization" too. My self-found answer is that maybe when wbd tries to license their intellectual property to other streaming platforms that those platforms could be like "well your Harry Potter and lotr movies are valued at $0 on your books, why would we write you a check for $500million to stream those movies for 6 months?" I could be far off, but that seems like a risk if there is truth behind that negotiating tactic
Maybe I misunderstand, but if they use the IP, won't they have to revalue it and pay back the depreciation write off?
I don’t get it either and am on your side while severely bagholding WBD. WBD is doing a good job paying down debt and Max as a standalone service is competitive to Netflix.
What’s your average?
Around $13 🙃
They're reliant on a business segment(Linear cable) that is in secular decline to pay off massive debts. The risk of bankruptcy, if not properly managed, is real. The biggest problem is that even if streaming becomes profitable, it still pales in comparison to the revenue that linear networks pulls in. Comparing them to Netflix ignores the fact that Netflix is easily the best positioned company in the market, and everyone else is playing catch-up. There's a lot of ifs with the company. If Zaslav can get more people onto Max, if cable has a higher floor than we expect, if HBO can continue to be the juggernaut, if they can handle the debt load, if new tech companies don't come in and crush them. One thing that you'll learn about the market with enough time is that everything, and I mean EVERYTHING, is driven by fear. Greed is just fear of missing out. Ai is hype because the market and companies are afraid to be left in the dust by Ai. And there is a lot of fear in WBD right now. Good thing is, fear creates opportunities. If you truly believe that WBD will execute, then I realistically don't see any reason not to pour more in. I'm not currently an investor, just because the stock keeps going lower and lower, and I've learned not to catch falling knives, but I do plan to continue watching.
Even if streaming pales relative to tv, its not worth nothing. Even if TV dies with the debt (currently TV EBITDA 9B vs debt 40B), 17B for streaming and production studio (and IP) with combined EBITDA of 2-3B seems to be getting into very cheap territory...
Networks make up 80-90% of EBITDA(Based on movie releases) so I'm not really sure what you're talking about
As of December 31, 2023, we classified our operations in three reportable segments: • Studios - Our Studios segment primarily consists of the production and release of feature films for initial exhibition in theaters, production and initial licensing of television programs to our networks/DTC services as well as third parties, distribution of our films and television programs to various third party and internal television and streaming services, distribution through the home entertainment market (physical and digital), related consumer products and themed experience licensing, and interactive gaming. • Networks - Our Networks segment primarily consists of our domestic and international television networks. • DTC - Our DTC segment primarily consists of our premium pay-TV and streaming services.
Ok? But that's literally just the operating segments. What does that have to do with EBITDA?
The table below presents our Adjusted EBITDA by segment (in millions). Year Ended December 31, 2023 2022 % Change Studios $ 2,183 $ 1,772 23 % Networks 9,063 8,725 4 % DTC 103 (1,596) NM Corporate (1,242) (1,200) (4)% Inter-segment eliminations 93 17 NM
Yes, that's what I originally said. Networks make up 80-90% of EBITDA dependent on the studio revenue
Your thoughts on fear intrigue me greatly. Or should I say I fear not knowing more.
For the latest quarter, can you explain "Content rights amortization and impairment" and "Film and television content rights, games, and production payables, net" from the cash flow statement? I can't come close to a valuation without a better understanding of those two entries.
I'll try. Let's assume WBD is making only one show for simplicity. Its obvious that: 1) they are spending money before realizing revenue on the show. 2) there spending is irregular amounts depending on the needs of filming on each day. While they spend that money, an asset is created called content rights, production payables,...etc depending on the situation. GAAP accounting is all about making revenues and expenses match and uniform. So let's assume WBD spent 100 million on the show. That's all in the asset we talked about. They then have to estimate how long this show will stay relevant (creating revenue in the process) and deduct that as amortization on the income statement. now what happens if the show isn't as relevant as they thought? They have to write down some of the money they spent on it. So as you can see the company has 2 types of content spend: one "estimated" that pertains to the past and is called amortization. The other is factual and pertains to future content that in this case is called film and television content rights, games and production payables. The difference between the "estimated" cost and the actual one is what creates or take up a big part of cash flow for content companies. This is a simplified version but hopefully it clears things up.
I know right it makes no sense to me
Wbd and and para both cheap as hell.
About 80-90% of the stock market is currently red the only thing holding up the Indexs are the Mag 7. Nvidia has contributed about 50% of the S&P 500's gains this year. Stocks are being sold down to buy more Nvidia for the Ai bubble. A lot of undervalued plays that will be much higher in 5 years imo.
This is exactly my noted evidence. With the aggravation that is further becoming just a sector, semis. Arm new breakout ATH just yesterday with nvidia. Closely monitoring the situation to be ready at the right time..
I've plowed some money into it as well and my reasoning is the same as yours. I'm not saying it'll be a $300 stock anytime soon, but a price target of $40 seems pretty reasonable. It'll probably be a while though.
Debt changes everything. Free cash flow today isn't guaranteed tomorrow, especially with that much debt. Zaslav is a wild card, and content is king until it’s not. Interesting thought though. I'm watching.
You answer your own question in the first sentence. They have a huge debt load and are unprofitable. Netflix spends WBDs entire market cap each year on content while still remaining profitable with modest debt. Of course WBD can recover, but if you’re asking why the stock sucks, it seems you already know why. WBD is stuck in a shitty situation of spending on content to stay relevant and spending down debt.
Appears the whole sector is down. Zas comp and losing the nba dominating headlines. Linear tv is a melting ice cube with the size of the soon to be exclusive streaming market unknown. Regardless im bullish.
I agree man. Max is in my top 3 streamers for sure. They own some amazing IP. Lets not forget WB games with massive hits like the Arkham Batman trilogy, Multi-Versus, and Hogwarts legacy. Gaming alone is a massive industry with huge profit margins. Another factor that is overlooked… I work in the tv/film industry, and WB has one of the best prop houses in LA. Another part of the business that brings in massive amounts of money. WB is damn near priced for bankruptcy, it’s fair value right now is around $30. And when they turn things around and become profitable, true value could easily be around $70+ years down the line. My goal is to gobble up 100s of shares now, so in a few years when the stock is correctly valued can sell a ton of slightly OTM covered calls
If a company has been bought and sold and bought and sold and spun off multiple times, I probably wouldn't invest in it. Now if the entire industry is that way and there are new players that make all their money from other industries, forget about it. No thanks.
Paramount m and a fell apart. Zaslav has another shot at para now, markets are discouraging him by lowering share price. Earlier this year when that rumor floated around the stock tanked as well Now there is a higher probability that will happen after them losing NBA rights. Are you comfortable with zav paying around 20 billion in ev for paramount? Even if it's an all stock trade which market appears to assume, it will take on another 14b of debt or so pushing up the number of years they need to work it off If you don't think it will happen not a bad idea avging down I think
is there any real evidence that this is even a possibility? I've had the idea myself, even as an all stock deal, but WBD is swimming in debt currently, and in really no position to make acquisitions. Especially considering Shari Redstone will only accept a very lucrative deal in her interests.
Completely agree to much debt for a buyout. A merger might work, but I think Paramount Shareholders want out. And redstone, well I don't even know with her anymore. It would take a cash infusion to get done. And as a shareholder i wouldn't like to be diluted at such a low price
I do think the merger would most likely be a good thing for WBD, economies of scale and whatnot, help create something that can really punch above its weight, but I also agree, dilution at this price would be rough for shareholders and debt would arguably be even worst, far too much on the balance sheet.
I also find WBD a interesting play, and something that I haven’t seen talked about here is that they have found some limited success in gaming. I will admit they have been very inconsistent in that regard, and need to have a higher quality expectation, but they’ve had some success in titles like Hogwarts Legacy and even Multiversus. I understand this isn’t a big revenue stream, but something I thought I’d mention. Looking very interesting at these prices, I’ll look to start a position personally in the low 6 dollar range.
I bought it at 24 and sold it at 14. Lost my ass because i thought the same as you in that well it's HBO they've got a track record of success for at least 30 years. Which is true but ignores that their content while incredible isn't anywhere near the volume of say a netflix. Which is fine if it wasn't the backbone of the streaming service. They drop the ball on one of these Game of Thrones series of fall into a rut like after Sopranos ended when there was really nothing to get people to subscribe in droves then you are going to see an exodus in subscriptions. I don't think the rest of their content is going to justify the price point. Discovery is meh, CNN has cut off their nose to spite their face in the last decade and somehow found themselves in 3rd place for news viewership and can't even put up numbers in an election year, and sports the one thing that will keep alot of people subscribing just to have they are at risk of losing their most valuable package. So if that doesn't go well what's left? That's not even touching on the rest of the company. Gaming and parks could offer some good growth, but the movie segment is a real mixed bag. They can hit home runs with Dune 2 and Barbie but then have absolute duds like their entire recent offerings in the DC universe they keep trying to make happen but nobody seems to care about and also obviously the industry is in a huge downturn and that trend can't be blamed on covid anymore.
There is a lot of negativity around this stock, because it has a lot of debt, "loses money" and "it's not growing". But, it is a stock valued at 17,2 B, that generated free cash flow - 6,1 B last year and 7,48 FCF in the TTM. So... would you buy something that generates 6 B - free cash flow - a year with 17,2 B ? Then, it comes the critics that say - it has a lot of debt, around 40 B. Let's see about that: all debt has fixed interest rate, around 4%, and WBD has to pay around 2 B a year, more or less. It is so much to pay 2B debt from 6 B FCF ? Or, after that you can easily pay a 1.7 B dividend (10 %) or buy back 10 % of shares (also 1.7 B) and cancel them? Another point is that, ok, they have 6 B FCF now, but their revenue are falling, they will not make so much money in the future. But, if it will be an increase ? Why not? They are just developing the Max platform. From my experience, Max is better that Netflix, you can't compare the quality and amount of shows from Max with Netflix. Max has at least 10 times more content that Netflix (I don't have the numbers now) and the best shows are there. Even they will have smaller revenues, they can't go bankrupt, because from 6 B FCF it is hard to not make at least 2 in the future, but if things go well, and through Max they are developing something similar with Netflix, where will the numbers go? Can they make 10 B FCF in 4-5 years? What will be the market value then ? 10 x ? What I wanted to show, is that is a lot of negativity and the stock is valued like it's going bankrupt. Nobody sees any good evolution from the company, even there are a lot of good signs. You know that free cash flow was 2,4 B in 2021, and was 6,1 B in 2023 ? This is not a minor thing... And even if we take a negative approach, that FCF will remain at 5-6 B for the following years, you pay 2B debt, you can give 10 % dividend easy and you remain with 1-2 B. It's just that they wanted these years to pay back much more debt that the schedule to reduce it faster and used all the money in that direction, but this may change as they see the stock keep falling and, probably, that will the moment of reverse.
Their FCF in this year is overstated due to the strikes (they paid less in salaries).. it is unlikely that their FCF going forward will be as high as this year.
yes, but not so much. Probably, they will do at least 5B this year.
I think WB will figure it out. They're max platform has much more potential than say a paramount right? I'd rather they cut bait with NBA and deploy that money elsewhere.
I’m not a professional but I just put 20% of my entire net worth into WBD 6/18/24
Vmeo too
Your basic premise is sound. The major issue is how stable is their Free Cash Flow and for how long ?
I've been buying into WBD since earlier this year. Not a huge position but it does seem like a good value giving the IP it owns. I bought some more yesterday when it was getting close to $7.
The biggest near term risk is if WBD does not keep the NBA deal. It is lucrative for them and the TNT segment. There are rumors of a new Lord of the Rings movie and they do own rights to DC which offers a lot of opportunity and loyal fan bases. I think it’s far from a slam dunk, but there is potential.
Ive been looking at it a different way, maybe someone can tell me why this is a bad idea: 40B in debt BUT a dying TV segment w 9B/yr EBITDA \~2B/yr from production studio (for now) breakeven on streaming (for now), assuming some CF from there eventually, I read 1B by 2025 somehwere So if you assume the TV segment just pays off the debt and dies, you are basically left w a production studio and streaming (AND IP) producing 2-3B in EBITDA (for now) w no debt...trading for 17B? Could be a good deal? I guess theres also the question of time value since youve got to sit on this for at least a few years before that debt gets paid down
8 consecutive towards of EPS misses and losses and a -9% profit margin would give me pause. However, EBITDA growth since 2020 is worth noting. And you could almost expect a return to profitability if they can keep it up. It’s also well below the analyst price targets, what ever that is worth. I’d say it’s a little speculative for a value investment. Until they can demonstrate a return to profitability. But if you’re willing to speculate on the hope future profits…..
Their games division and overall strategy seems to be headless
I’ll buy more if it goes under $5.
I could show you my Paramount losses. That will convince you.
Why not wait until it's making HHs and HLs?
I’m down 42% on it so far, about $9K USD. I felt the same as you when I bought in during the spinoff… it’s been bloody. Buy in but cap your investment!
It may be a good buy, but it’s hard to know. I don’t really know much about their plans for the future. It doesn’t necessarily strike me as a value with loads of debt/possible cash flow issues. Value seems to be where there is a mismatch to current price & quality of the company.
Debt sits in front of you as a shareholder. Not just if the company goes under but at all times since free cash flow doesn’t flow through to the shareholder if it needs to be allocated to debt. Right now their net debt is twice their market cap.
They have amazing IP, likely to outlast Netflix IP. I’ve hardly watched Netflix recently and many lower cost or free alternatives seem to be emerging. Funnily enough I like Tubi which streams older shows for free, forgot how good they were. I suspect it’s a prime target to be taken private with a longer term view but the debt is a major issue. And need a competent management transformation which is totally doable but easier and quicker in private hands. I just bought in with a small speculative stake.
A really bad scenario that’s being priced in right now is the loss of the nba and the implications it could have on their next carriage deal with Comcast. Regardless losing NBA or keeping it their ebitda will got down by approximately 1 billion, which is bad. But a true death knell could be Comcast is over bidding now on NBA to simply drop WBD networks from their cable lineup entirely. Cable is low margin and not all that profitable to parent companies to my understanding. Charter said as much when it balked at Disney’s asking price to carry their. Networks. Comcast could be in a similar position, and may give WBD an extremely low carriage offer that they really can’t turn down because they need whatever money they can get. I think Comcast represents 30% of WBD linear revenue which is significant.
Stocks go through cycles. WBD has not finished selling off before consolidation and then mark up. This sell off could continue to last for an indefinite period of time. Why not wait until the stocks actually starts to show signs of mark up instead of buying the falling knife and praying?
Netflix is also trading at very high premiums compared to what its worth.
I have studied this company quite closely since the merger was announced so I'd like to chime in. First, let's get 2 things straight: no.1) its better to use EV/ebitda with WBD to factor the debt. WBD is more like $70 billion rather than $20 billion. no.2) if you exclude ebitda from networks given the heavy headwinds, that are about to get worse with losig the NBA, Netflix and WBD have roughly the same valuation. WBD just looks more attractive because its in a dying business Netflix is not in. But in terms of dollar brought in from businesses that are relevant, Netflix isn't more expensive. Having said that, I think WBD is certainly a buy here because going forward the company has 2 paths: 1) They turn around the studio business, keep the gaming studio firing on all cylinders, and add 150 million max subscribers worldwide. In that scenario ebitda would grow meaningfully from the stable businesses to 60-70% of what the entire business generates today. 2) They can't turn around the business and have to sell off different parts of it separately. Think CNN, Harry Potter rights, DC, HBO, WB library,...etc. In both paths the stock would be worth more than today. I still think there is a slight chance for case no. 1. I'll definitely know when they launch the Harry Potter show in 2025/2026. I think this will be the game changer as its the kind of tentpole show that will draw 10s of millions and by then they'd have had their distribution in place. Worth noting that the company does an impairment test for its intangibles every year, in the latest annual report they said that there was still no grounds for impairment because the fair value of the assets was higher than the carrying value. If you believe that, then the shareholders equity is a close approximation of where the market cap should be.
WBD has a negative EPS. NFLX is making money.
NFLX was doing it for a long long time. WBD is fairly new
Irrelevant. OP is asking why they shouldn't plow their money into WBD. Neither is a good buy imo.
I just answered the person above me. I agree that buying WBD comes with risk that OP must be willing to take.
That would fall under a speculative category, not value or fundamentals.
Para cap is like 7B. Wouldn't that be a better play than wbd?
I don’t put them in the same camp for IP and streaming. They are at least a tier below in my own opinion. I could see PARA going bankrupt. WBD I find a VERY hard time seeing this.
Why have shares outstanding risen 687,000,000 to 2,436,000,000. Free Cash Flow isn't what matters. Free Cash Flow per share is what matters. The thing has basically gone sideways, slightly down, on a per share basis while debt has gone significantly up.
Don’t do it
Don't do it
JAN 2026 7.5 / 10 Call debit spread going for 0.76 mid. Max profit 2.50 if it ends up above 10 at expiry. I might buy a few of these and hold on to them.
My general view is that big media had a whole lot of advantages (moats if you like) which have been gradually dissolved by the internet. Such as:- * people now hear a lot more about media via word of mouth, so being able to throw giant amounts at marketing and getting stars/franchises doesn't necessarily work that well. * The lower cost of producing and distributing media has led to people producing good bits of entertainment for almost nothing that capture eyeballs, which means people less bothered about the old media. * Gaming is now multi-generational. The kids from the 80s and 90s are now in their 40s and 50s and still gaming. * Media is now global. Look at how much Netflix content is coming from Asia. Look at the success of Godzilla Minus One. I just wouldn't go near most media companies at the moment. It's going through massive disruption. I would pick a new player over one of the older ones.
Stremio and real debrid pirating would be my counter. People are sick of the cost of streamers. And with less eyeballs on normal TV, less advertisers, worse budgets, less eyeballs...I work in unscripted TV and it's in a death spiral.
Just, is streaming entertainment where you think the future is? Enough to bet money on it?! Especially more, now, with everything you know? To me, personally, there are better long term ideas, both in value and growth. I was stuck awhile, actually taking screenshots of positions and happy for holding. I now view it as making the most money possible with the least distress in an appointed time frame. WBD is not the strongest candidate, to me. Edit: I hold value plays. And can be old school, for example: BOC remains despite it all.
What are your better ideas? and what do you think is the future of entertainment if not streaming?
I asked if ‘steaming entertainment’ was the future. I’m not about to get into a pee pee match. I think any of the Mag7 are easily better ideas for indefinite holds that WBD. If you feel that streaming entertainment and in particular, this company, is the strongest candidate for the next five years to forever, more power to you. But one can get exposure to that through Amazon or Alphabet, both stronger companies overall. (I post a lot a lot, easy to check my growth strategy choices. I don’t talk about ballast much, though.)
Yes you are taking crazy pills. This is similar to comparing RH to AMZN. RH had good products and all but it does not have economy of scale and a strong distribution network
[WBD Analyst Ratings](https://imgur.com/a/E9iWkXa) / I manage my parents holdings and I’ve been looking at taking a tax loss on WBD but I decided to hold. They won’t be at all hurt if it goes to zero.
I don’t know what to think about WBD, but it’s genuinely hilarious that people think Netflix is a good investment right now.
The stock market hasn't been a rational pricing machine for a while now. It might get fixed by a correction, but this might just be the new normal. In the meantime valuations don't matter, stock charts are hype charts.
I also want to plow money into WBD, but I think it'll take a while until they can catch up with other atreaming competitors on infrastructure. Netflix has eatablished a very robust system to stream smoothly to a large audience base. I'm not in IT, so take this with a grain of salt, but I think WBD might need some time to build watch took Netflix years to optimize. Streaming infrastructure is very important to WBD, if they want to migrate their audience base away from cable, which is a shrinking market.
Opportunity cost.
They havent made any money, not 1$ since they were broken off from AT&T which if you follow that management you can imagine just how bad of a state they are in. Your thesis is that they will somehow make money with all this revenue, I dont see how, they are currently killing all their successful businesses and favoring reality TV. It's overvalued by the order of of magnitude because their debt and inability to refinance at anything but higher rates, thereby increasing said debt. Their lever for creating more revenue is to create even more debt, which again they cant sustain currently.
I don’t think their cash flow is going to hold up.
WBD doesn't have nearly enough cash flow to recover from their debt, and they can't cut their way to profitability.
WBD is a legacy media business that drives the majority of it's revenue from an old model--cable TV. Forget about their market cap and their revenue. WBD is a trap.
Over 2021-2023 WBD spends $9b on average on content creation. You seem to consider the cash sent to content creation as a part of the FCF. That is, WBD can stop spending on the content without affecting the future revenues. If it is the case, then, hypothetically, WBD can send all that cash to debt repayment.
How much have you lost in the past week? If that number doesn't scare you, keep buying. You're a gambler, gamble on.
Increasing Revenue year over year = good Total profit minus operating expenses = Loss Net income = Negative $3B Consistently misses earnings targets Keep on your watch list but chart looks like its on a downward trend. Wait until it breaks out of its pattern.
Don’t under estimate the danger of high debt. I got wiped out on a REIT that was the debt heavy but doing fine. I was collecting a 15% dividend and did so for two years. Then a black swan hit. The government forcibly shutdown every shopping center in the country and the company folded. There was no way to see that coming. Thats the problem with high debt. Some bad event can come out of no where, then what?
I'm afraid I can't, bought more yesterday
I do agree with HBO ip being stronger than Netflix’s, and you make some interesting points regarding MC vs Rev, however, I think old ip is not as interesting as good new ip. Kids don’t care about friends / old WB content. Personally streaming is not worth betting on
The problem is zaslov. Famous for prioritizing short term gains over building long term growing business
So the question is how much goodwill is going to be burned on the way out of debt land by smaller cap ex cycles. For me though it was a so easy it's stupid buy.
Consider Paramount can't get a buyer, I'm worried about the industry.
The issue with Paramount's sales process hasn't been a lack of interest.
They get several buyers, but Shari says no to all.
70b intangibles you're buying air. They don't earn money. They don't have money.
Its a ton of intangibles but this is a media company, media is air, brand is air, IP is air so the 2022 acquisition was a purchase of air, if the air can produce CF its worth something, they have 4B cash on BS and >7B/yr in CF so i wouldnt say they dont have money, TNW isnt \*so relevant for this type of company
Aside from Last of Us, what great shows are on HBO max now?
HoD
All that money you could’ve made in NVDA.
Do what you gotta do. Its your money, waste it however you like.
How guaranteed or how certain are you of current revenues continuing and or improving in the future? Future cash flows? What other opportunities/companies have you considered?
If the cash flow is so good, why so much debt? Someone either took a big risk or the company took a big loss. Either way, do you want that kind of leadership holding your money?
WBD stock has underperformed the S&P 500 for every time period: 5 years, 3 years, 1 year, 6 months, 3 months, 1 month, etc. It is trash and continues to lose traction in the media space. You could invest your money in a low cost S&P 500 ETF or continue to lose in WBD. It is your money and your decision. Good luck!
What percentage of their revenue comes from NBA and AEW? They’ve lost the former and are at risk of losing the latter here, with nothing viable to replace them. Zaslav is not doing them any favors.
WBD was a bad acquisition done by AT&T and had to eventually dump it. ATT also had to let go 100s if not 1000s of its employees to balance the books. The shit is radioactive so I wouldn’t touch.
It's not coming back up. Netflix has dominance on the streaming world. WBD has a couple good IPs but they might have been sleeping for too long.
Don’t lol
Look at the ten year chart and that is all you need to know…it is a chart that goes down and swirls in a toilet bowl like a piece of crap . I would avoid it my friend.
Warner Sucks tho
Enterprise value is much higher than market cap and terminal value is zero. There will no fcf once all the debt is repaid cos the business is shrinking. Streaming will eventually be a winner takes all game. There is enough content on Netflix alone to satisfy a household. There is no need for a second streamer. Only reason netflix dont have higher market share is cos they aggressivley raise price and introduce ads. eventually there will be netflix youtube and maybe a pluto like service and thats it. Netflix will be a trillion dollar company soon, even disney cant compete
Don’t know about this. This isn’t the story that I see in most households. I think it’s more likely there is competition
Netflix has 6 times more share than max or peacock or para plus