Warner Bros. Shares Discovery continues to lose value amid disappointing results

Key takeaways

  • Warner Bros. Shares Discovery fell in pre-market trading Thursday after reporting first-quarter results that fell short of analyst estimates.
  • Revenue fell more than expected, and WBD also posted a larger net loss than analysts had estimated.
  • Ongoing negotiations with the NBA on the league’s next broadcast deal, along with a streaming package partnership with Disney that the companies announced Wednesday, could significantly impact WBD’s future earnings.

Warner Bros. Shares Discovery ( WBD ) fell in pre-market trading Thursday after the entertainment conglomerate’s first-quarter results topped estimates.

Revenues are not in line with estimates, net loss is greater than expected

WBD’s revenue fell 7% year-over-year to $9.96 billion from the $10.7 billion the company reported a year earlier, less than the consensus estimate of $10.25 billion compiled by Visible Alpha.

The film and TV producer also posted a wider-than-expected net loss of $966 million, almost double analysts’ expectations of $501.7 million, but narrower than the $1.07 billion loss reported a year ago. On a per-share basis, WBD reported a loss of 40 cents, slightly less than last year’s loss of 44 cents but almost double analysts’ estimate of 21 cents.

Revenue fell 12% in the WBD studios segment, which includes film studios and video games, and fell 8% in the networks division, which includes television holdings including CNN and the Turner family of networks such as TNT and TBS. The company’s revenues in the direct sales segment, which includes HBO and the Max and Discovery+ streaming services, remained almost constant.

NBA rights and Disney’s streaming partnership could have a major impact on future reporting

WBD’s television division could see both its revenues and costs impacted over the next few years if the company loses part of another broadcast rights deal for the National Basketball Association (NBA). WBD’s TNT has been broadcasting select NBA regular season and playoff games for decades.

WBD Chief Executive Officer (CEO) David Zaslav reportedly said at a recent event that the network remains “in constructive negotiations with the NBA,” after stating in 2022 that the company and the network do not necessarily “have to have the NBA,” according to Sports at the reception.

A day before the earnings report, WBD and Disney ( DIS ) announced plans to offer Max bundles alongside Disney-owned Hulu and Disney+ in both ad-supported and ad-free packages starting this summer. Pricing information was not included in the first version.

WBD shares fell 3.6% less than an hour before Thursday’s opening bell. This year, the company’s shares have already lost about a third of their value.