Warner Bros Discovery Inc (NASDAQ:WBD, ETR:J5A)'s upcoming third quarter earnings are expected to show the continued impact of headwinds on the entertainment giant, analysts at Bank of America believe.
Trends in Linear are seen as stable while Warner Bros’ Studio results are expected to be adversely impacted by marketing costs related to Joker: Folie à Deux, without the revenue benefit of having the movie run during the quarter.
A bright spot is TV production, which analysts wrote has a “robust” future slate and direct-to-consumer (DTC) net additions are expected to be healthy.
The analysts lowered their studio earnings before interest, taxes, depreciation and amortization (EBITDA) expectation for Q3 to $500 million from $500 million but maintained DTC EBITDA of $188 million.
The bank’s analysts forecast Q3 revenue of $9.90 billion, below the Street consensus of $9.99 billion.
They also lowered their Q3 EBITDA forecast to $2.39 billion from $2.64 billion but repeated their projection for full-year adjusted EBITDA of $9.13 billion and free cash flow of $4.8 billion.
Analysts on average see Warner Bros narrowing its net loss per share to $0.03 from a loss per share of $0.17 in the year-ago quarter.
Bank of America repeated its ‘Buy’ rating on the company and $12 price target, citing their belief that Warner Bros has a “compelling assortments of assets.”
Upcoming catalysts include easing Studio comparisons, the continued rollout of its subscription video-on-demand platform Max internationally, and a potential recovery in advertising.
“If Warner Bros renewal with Charter can be replicated in coming deals, we believe it would be a big improvement versus expectations,” analysts added, seeing the deal as a “huge validator” of the company’s NBA media rights stance.
Shares of Warner Bros traded hands at about $8 on Tuesday afternoon.