Warner Bros. Discovery Stock Price Forecast: Beware of Red Flags

The Warner Bros. Discovery stock price has lagged in the past few days as investors adjust to the new operating structure. The WBD stock is trading at $23, lower than last week’s high of $27.53, bringing its total market capitalization to about $60 billion. The focus will shift to the upcoming Netflix earnings, which will provide a picture of the entertainment and streaming industry.

Is WBD a good buy?

Warner Bros. Discovery is a new company whose shares started trading last week. The company was created with the combination of Discovery and Time Warner, a firm acquired by AT&T a few years ago. The new firm owns some of the best-known media companies in the United States and worldwide.

Warner Bros. Discovery owns companies like HGTV, TLC, CNN, HBO, Discovery, Food Network, and Animal Planet, among others. It also owns CNN+, the “failed” subscription service product owned by CNN. WMD’s goal is to dominate in both scripted and non-scripted businesses. Most importantly, it aims to compete more with streaming giants like Netflix and Disney.

In its presentation, the company expects that it will have over $52 billion in revenue in 2023. In addition, the company will have an EBITDA of $14 billion, while its direct-to-consumer (DTC) business is expected to have about $15 billion in revenue. Most importantly, the two companies are expected to have synergies – read layoffs – worth about $3 billion. 

However, Warner Bros. Discovery faces significant challenges ahead. First, the company is expected to spend billions of dollars every year on content. Besides, companies like Netflix and Disney are spending over $30 billion on content this year. Second, while the company has a market cap of over $60 billion, it also assumed about $43 billion of debt. Third, there are concerns about the company’s advertising business. For example, Discovery’s ad revenue has been falling for a while.

Warner Bros. Discovery stock price analysis

The daily chart shows that the Warner Bros. Discovery share price has not done well for a while. In fact, it has crashed by about 70% from its highest level in 2021. The stock price goes way back because the new company assumed that of Discovery. A closer look shows that the shares have formed a triangle pattern and moved below the 25-day and 50-day moving averages. 

Therefore, the outlook of the WBD is currently bearish, with the next key support level being at the psychological level of $20. A move above the resistance at $26 will invalidate the bearish view.