What Happened:
Shares of global entertainment and media company Warner Bros. Discovery (NASDAQ:WBD) jumped 10.1% in the morning session after the company announced a new carriage agreement with Charter Communications, which will combine traditional linear video and direct-to-consumer (DTC) streaming services. This is a renewal of an earlier deal between both companies in an effort to add more value to customers.
According to the terms of the new deal, millions of Spectrum subscribers (Spectrum is a leading distributor of TV and internet services under Charter) will have access to an ad-supported version of Max (which includes HBO and Discovery+) in addition to their existing plan at no extra cost. The deal potentially increases the reach of both companies, which should be accretive to sales growth as more consumers adopt the new package.
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What is the market telling us:
Warner Bros. Discovery’s shares are somewhat volatile and over the last year have had 23 moves greater than 5%. But moves this big are very rare even for Warner Bros. Discovery and that is indicating to us that this news had a significant impact on the market’s perception of the business.
The biggest move we wrote about over the last year was about a month ago, when the company dropped 13.4% on the news that the company reported second quarter earnings results. Its EPS missed, and its revenue fell short of Wall Street's estimates. We note its operating margin was severely negative because of a one-time impairment charge. Overall, this was a weaker quarter for Warner Bros. Discovery.
Warner Bros. Discovery is down 36.8% since the beginning of the year, and at $7.38 per share it is trading 41% below its 52-week high of $12.49 from December 2023. Investors who bought $1,000 worth of Warner Bros. Discovery’s shares 5 years ago would now be looking at an investment worth $262.54.
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