CFRA revised its price target for Warner Brothers Discovery (NASDAQ:) stock on Tuesday, lowering the target from $10.00 to $9.00, while maintaining a Hold rating on the stock.
The adjustment was made based on a reduced risk premium and a forward total enterprise value to earnings before interest, tax, depreciation and amortization (TEV/EBITDA) multiple of 6.24 times , which is lower than the average of its direct competitors.
The company noted that Warner Brothers Discovery is expected to post negative adjusted EBITDA in the first half of the year, but expects a positive turnaround in the second half of 2024. The company’s programming content for 2024 may be impacted due to strikes by actors and writers, presenting a challenge to production schedules.
Despite these setbacks, Warner Brothers Discovery remains focused on improving its major film franchises, including Game of Thrones, Harry Potter and Superman. The company reported free cash flow of $3.3 billion for the fourth quarter of 2023 and $6.2 billion for the full year.
CFRA also expressed skepticism about the growth rate and profitability of Warner Brothers Discovery’s MAX video streaming service. The firm suggested that the consensus price target of $13.70 may be overly optimistic, implying a high growth scenario that may not materialize as quickly as expected.
Finally, the CFRA highlighted that while last year’s expectations were for significant EBITDA growth in 2024, the current consensus estimate stands at $9.9 billion, slightly below actual EBITDA of 10 .2 billion dollars for 2023.
The 2025 consensus estimate of $10.4 billion indicates EBITDA growth of less than 5%. According to CFRA, the current stock price reflects reduced investor patience for Warner Brothers Discovery to successfully transition its linear networks to the MAX streaming platform.
Insights on InvestingPro
In light of the recent CFRA price target revision for Warner Brothers Discovery (NASDAQ:WBD), a look at real-time data from InvestingPro provides additional context for investors. With a market capitalization of $20.57 billion, the company is trading at a low price-to-book multiple of 0.45, suggesting that the stock may be undervalued relative to its book value. This is in line with one of the Professional investment tips highlighting the low valuation of the stock on this parameter.
Another thing worth noting Tip for InvestingPro for WBD is its strong free cash flow performance, reflected in the company’s reported free cash flow of $6.2 billion for the full year. Despite the challenging outlook with negative adjusted EBITDA expected in the first half of 2024, this financial strength could provide a cushion for the company. Furthermore, the stock’s recent price movements have been quite volatile, with a 3-month total price return of -24.61%, which should be considered by investors looking for stability.
For those looking for more in-depth analysis and more Professional investment tips, more insights are available, including 6 more WBD tips on InvestingPro. Use the coupon code PRONEWS24 to get an additional 10% discount on an annual or two-year Pro and Pro+ subscription and get comprehensive information to address the complexities of the market.
This article was generated with the support of AI and reviewed by an editor. For further information please see our T&Cs.