Warner Bros. Discovery Advertisement Tier Migration Impresses Analyst, Calls Management Streaming Strategy Logical

Benchmark analyst Matthew Harrigan maintained a Buy rating and $26 price target on Warner Bros. Discovery, Inc WBD with the relaxation of valuation parameters allowing headroom, especially as investors gain confidence in long-term earnings power. 

Advertisement Video On Demand (AVOD) migration from SVOD is gathering remarkable momentum in 3Q22, per a Kantar Media survey of 11,435 video streaming customers, suggesting the new HBO approach is well conceived with FAST also a possibility.

The overall consumer AVOD migration suggested that management’s streaming strategy is compelling even as the outside media focuses on cost reduction pain. 

Management is implementing newfound greenlighting discipline at the Warner Bros. studio, original series trimming at HBO extending to canceling season 5 of Westworld, significant changes at CNN, especially Headline News, and even top management change at the Discovery lifestyle networks. 

Animation development attracts media attention as it contributes to management’s $3.5 billion 2024+ synergy target in early November.

The merged HBO Max and Discovery+ streaming services, now under code name BEAM, are reportedly likely to fall under the ‘Max’ moniker with feature hubs from HBO, Discovery, Warner Bros., and DC Comics.

DC Extended Universe belt tightening applies even to most superheroes apart from Batman. Bruce Wayne is likely to be exempt from occupational stress as The Batman grossed ~$770 million globally this spring, with Robin Pattinson slated to appear at April 2023 Comicon. 

Earlier this month, Warner Bros. indicated shelving a third Wonder Woman movie from director Patty Jenkins, likely off script concerns and mixed box office and critical reaction to Wonder Woman 1984 and star and creative compensation. 

Black Adam may lose $50 million+ even as the Rock earns $50 million+ off the $195 million - $230 million production cost movie with just ~$385 million in global gross. 

The Flash, the most visibly fraught release with a $200 million cost, is also reportedly “unlocked” and subject to revision. 

Indications for Christmas 2023 film Aquaman and The Lost Kingdom remain optimistic following the $1.148 billion global tally for the original film. However, there are script, timing, and star Henry Cavill uncertainties around Man of Steel 2.

Price Action: WBD shares traded lower by 0.28% at $10.86 on the last check Wednesday.