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On Thursday, Raymond (NSE:RYMD) James adjusted its outlook on Warner Brothers Discovery (NASDAQ:WBD) shares, raising the price target to $14.00 from the previous $12.00, while keeping an Outperform rating on the stock. The adjustment follows Warner Brothers Discovery’s fourth-quarter 2024 results, which aligned with or surpassed expectations, alongside the company’s 2025 outlook. The media giant, currently valued at approximately $26 billion, appears undervalued according to InvestingPro analysis, with analyst targets ranging from $9 to $22 per share.
The Raymond James analyst highlighted Warner Brothers Discovery’s robust asset portfolio, including top-tier intellectual property like DC Comics, Harry Potter, Lord of the Rings, and Game of Thrones, as a key strength. Despite acknowledging concerns regarding the company’s leverage and significant reliance on linear television, the analyst suggested that fears about leverage might be overstated. InvestingPro data shows the company operates with a moderate debt level, maintaining a debt-to-equity ratio of 1.15, while demonstrating a strong free cash flow yield.
Warner Brothers Discovery’s direct-to-consumer (DTC) segment is showing promising growth, with global subscriber increases, revenue expansion, and positive cash flow projections. The firm now anticipates approximately $1.3 billion in DTC EBITDA by 2025, which includes contributions from linear HBO operations.
The analyst also noted the potential of Warner Brothers Discovery’s underappreciated assets, such as WB Games, which is currently under-earning. There is an expectation of longer-term upside and the possibility of capital returns beyond 2025, as the company continues to generate free cash flow and grow its direct-to-consumer segment.
The report from Raymond James comes after a detailed analysis of Warner Brothers Discovery’s recent performance and strategic outlook. The raised price target reflects the firm’s confidence in the media conglomerate’s ability to navigate industry challenges and capitalize on its extensive portfolio of valuable intellectual properties.
In other recent news, Warner Bros Discovery Inc. reported its fourth-quarter 2024 earnings, missing both earnings per share (EPS) and revenue forecasts. The company posted an EPS of -$0.20, falling short of the expected -$0.001, while revenue came in at $10.02 billion, below the anticipated $10.24 billion. Despite these misses, Warner Bros Discovery added 6.5 million direct-to-consumer subscribers during the quarter, ending the year with 117 million subscribers. The direct-to-consumer segment showed significant improvement, contributing nearly $700 million in EBITDA, a $3 billion increase over two years. The company is targeting $1.3 billion in direct-to-consumer EBITDA for 2025, aiming for 150 million subscribers by 2026. Analyst firms have not provided any upgrades or downgrades in this context. Warner Bros Discovery continues to focus on expanding its global reach, particularly with the international launch of its streaming service, Max.
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