Warner Bros. Discovery (WBD) stock price continued its underperformance this year as concerns about its business accelerated. It started the year trading at $11.4, crashed to $6.63, and rebounded to $10.5. So, is WBD a good media stock to buy in 2025?
WBD business is facing major headwinds
Like other media companies, Warner Bros. Discovery is facing major headwinds as concerns about all its businesses continue.
Its linear television business is on the verge of extinction as the cord-cutting trend continues. For example, a company like CNN has seen its viewership plunge after the last general election, with most of its shows generating less than 300,000 viewers.
The same trajectory is happening in other of WBD’s brands like Food Network, OWN, Cartoon Network, and Cooking Channel. With most young people spending their time on social media platforms like YouTube and TikTok, there are limited chances that they will become as wildly popular as they were in the past.
WBD has realized that, and in August, the company lowered the valuation of its linear television networks by about $9.1 billion. Some analysts believe that the company should either carve out the entire linear television business or sell some of its brands.
The most recent results showed that its network revenue rose by 3% in the last quarter to $5 billion, helped by the Olympics’ boost to its content business. Distribution fell by 8%, while its advertising business plunged by 13%.
The studio revenue crashed by 17% as its theatrical business experienced a 40% crash. Gaming revenue fell by 31%, while its TV revenue rose by 30% because of last year’s strikes, which affected its business at the time.
The only bright spot in WBD’s business is its direct-to-consumer business, which continued adding customers. It had 110.5 million subscribers, up by 7.2 million from what it had in the second quarter.
DTC’s revenue rose by 9% to $2.6 billion, while the average revenue per user (ARPU) rose by just 1%. The main challenge is that this is a very small part of its business, generating an adjusted EBITDA of $289 million. Despite its ills, its network business had an adjusted EBITDA of $2.11 billion, while Studios made $308 million.
Is Warner Bros. a good investment?
Warner Bros. Discovery is facing major challenges as its core business goes through a steep downturn. It is also one of the most indebted companies in the media industry, with over $3 billion in short-term debt and $37 billion in long-term debt.
Still, the company has value, especially its studios and direct-to-consumer business. As we wrote in 2024, a sum-of-parts valuation approach shows this. For example, while its linear TV business is in trouble, it can still be sold for a good valuation, possibly to a private equity company.
Analysts are optimistic that Warner Bros business will generate over $39.5 billion this year and $39.88 billion in 2025. Its loss per share is expected to move from minus $4.38 this year to 11 cents the next year.
WBD stock price analysis
The daily chart shows that the Warner Bros. Discovery stock price has bounced back in the past few weeks. This rebound is in line with what we predicted. It formed a golden cross in November as the 50-day and 200-day Exponential Moving Averages crossed each other.
The stock also forms a cup and handle pattern, the upper side of which is $12.68. A C&H pattern often leads to a continuation. It is now forming the handle section of this pattern.
Therefore, the stock will likely continue rising in 2025 to $16.30, about 55% above the current level.
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