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On Monday, UBS analysts maintained their Neutral rating on Warner Brothers Discovery (NASDAQ:WBD) with a steady price target of $9.00. The stock, which has declined nearly 25% in the past week according to InvestingPro data, currently trades at $8.02. InvestingPro analysis suggests the stock is undervalued, though it faces some financial challenges with a Fair Value significantly above the current trading price. The firm's analysts project that the first quarter results will likely show ongoing advancement towards the company's direct-to-consumer (DTC) profit goals, yet they anticipate challenges due to tough comparisons to previous theatrical performances and persistent pressures on Networks.
Warner Brothers Discovery is expected to see a year-over-year decline in consolidated revenues by 7.8% to $9.2 billion, adjusted from a previous estimate of $9.5 billion. Similarly, EBITDA is projected to decrease by 5.8% year-over-year to $1.98 billion, a slight reduction from the prior forecast of $2.08 billion. This follows the company's trailing twelve-month revenue of $39.32 billion and EBITDA of $7.67 billion, as reported by InvestingPro. The analysts foresee an accelerated decline in Networks, but improvements in DTC and Studio divisions could offset this downturn.
For the full year, UBS now anticipates an EBITDA of $8.65 billion, a 4% decline from the previous year. This adjustment reflects a more conservative outlook than the prior estimate of $8.78 billion. The forecast includes a downward revision of the company's total advertising revenue for 2025, now expected to drop by 13% compared to the earlier projection of a 10% decrease. This change is informed by historical patterns where past recessions have caused approximately 5-10% reductions in TV advertising revenue.
UBS analysts also noted that linear advertising appeared to remain stable in the first quarter, following existing trends, while digital and connected TV (CTV) advertising faced additional challenges. As the industry navigates potential recession risks, the analysts expect Warner Brothers Discovery to continue focusing on its new reporting structure and strategic initiatives aimed at unlocking value for shareholders. For deeper insights into WBD's financial health and future prospects, including 8 additional ProTips and comprehensive valuation metrics, investors can access the detailed Pro Research Report available on InvestingPro.
In other recent news, Warner Bros. Discovery has seen significant developments across various segments of its business. The company recently celebrated a strong box office performance with its release of "Minecraft," which grossed over $300 million globally on its opening weekend. Analysts from Bernstein SocGen Group maintained a Market Perform rating for Warner Bros. Discovery, despite the film's success. Meanwhile, BofA Securities upheld a Buy rating on the company's shares, setting a price target of $14.00, and adjusted its first-quarter revenue estimate to $8.9 billion due to challenges in the advertising sector.
Raymond (NSE:RYMD) James adjusted its price target for Warner Bros. Discovery to $13.00, maintaining an Outperform rating as the company navigates broader market challenges. In corporate governance, Warner Bros. Discovery expanded its board by adding Anton Levy, former co-president of General Atlantic, following pressure from activist shareholder Sessa Capital. This move aligns with the company's ongoing restructuring efforts, which aim to balance its traditional cable TV business with growth in streaming services. In the gaming sector, Warner Bros. Discovery decided to cancel the planned expansion of its "Hogwarts Legacy" video game as part of a reorganization within its video game unit. These recent developments reflect the company's strategic adjustments in response to evolving market conditions.
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