What Happened:
Shares of global entertainment and media company Warner Bros. Discovery (NASDAQ:WBD) fell 11.5% in the morning session after the company reported fourth-quarter results with revenue, operating margin, and EPS falling short of Wall Street's estimates, driven by weak performance in its Studio segment (revenue dropped 17% year on year and significantly missed estimates). Its Network segment also saw a 9% drop, but its results were in line with analysts' expectations. The only segment that grew was its Direct-to-Consumer (DTC) business (3% year-on-year growth). That was thanks to a 51% increase in DTC advertising revenue, which mostly came from Max's (formerly known as HBO Max) ad-supported tier. Overall, the results could have been better.
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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 22 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.
Warner Bros. Discovery is down 27% since the beginning of the year, and at $8.53 per share it is trading 46.5% below its 52-week high of $15.94 from February 2023. Investors who bought $1,000 worth of Warner Bros. Discovery's shares 5 years ago would now be looking at an investment worth $291.33.
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