Warner Bros. Discovery Analyst Says DTC Strength Won't Offset 'Joker: Folie A Deux' Flop, NBA Rights Concerns

Core Viewpoint - Warner Bros. Discovery (WBD) is facing challenges in the fourth quarter due to concerns regarding its DC Studios reboot, the loss of NBA rights, and the underperformance of "Joker: Folie a Deux" at the box office, leading to lowered estimates and price targets by analysts [1][2]. Group 1: Analyst Ratings and Price Target - Goldman Sachs analyst Michael Ng has maintained a Neutral rating on WBD and reduced the price target from $10.75 to$9.75 [2]. - The analyst anticipates strong direct-to-consumer (DTC) additions in the fourth quarter, but sees struggles in other segments such as linear networks, advertising, and studio operations [3]. Group 2: Financial Performance and Projections - The EBITDA target for the DC Studios segment has been lowered from $874 million to$800 million due to the box office underperformance of "Joker: Folie a Deux" [5]. - Despite concerns from the loss of NBA rights and the film's flop, the analyst projects WBD can achieve $1.56 billion in DTC EBITDA by 2025, driven by international market launches and content timing [5]. Group 3: Market Position and Stock Performance - WBD stock has outperformed the market since the last earnings report on November 7, 2024, following a new agreement with the NBA and an early carriage renewal with Comcast [4]. - The stock closed at$9.79, up 0.62%, with a 52-week trading range of $6.64 to$12.70, but is down 5% over the past year [6]. Group 4: Future Outlook and Strategic Initiatives - The analyst highlights potential growth catalysts for the Max streaming platform, including international expansion, password-sharing initiatives, new content, price increases, bundling, and ad-lite penetration [5]. - There is mid-term uncertainty regarding the profitability outlook for linear networks due to the loss of domestic NBA media rights [6].