WBD Rises 20% in a Month: How Should You Play the Stock?

Warner Bros. Discovery WBD shares have soared 19.9% in a month, outperforming the Zacks Consumer Discretionary sector’s return of 4% and the Zacks Broadcast Radio and Television industry’s return of 8.5%.

WBD shares’ rise can be attributed to its growing subscriber base from Max and strong content, while challenges in linear TV and studio performance pose headwinds.

Expanding Partner Base Aids WBD’s Prospects

Warner Bros. Discovery is positioning itself for long-term growth through strategic partnerships, investments and a focus on offering original content. A key catalyst has been the impressive performance of its Direct-to-Consumer (D2C) segment, particularly the Max streaming platform.

Its partnership with Disney – Hulu DIS provides bundled offerings, which are strengthening Max’s position in the market and aiding in subscriber acquisition. Max has expanded to 65 markets and has 110 million subscribers globally.

The noteworthy subscriber count is also supported by popular titles like House of the Dragon, The Penguin and Dune: Prophecy, which continue to attract a broad audience. Furthermore, local content offerings in international markets, especially with sports and language-specific content, are enhancing its global appeal.

However, despite the positive momentum, WBD faces several challenges. Its linear television business is encountering headwinds in the United States due to the industry-wide shift toward digital and on-demand content.

WBD has been dealing with inconsistent performance in its Studios business, which includes underperforming films like Joker 2. Increased competition from streaming giants like Netflix NFLX, Amazon AMZN and emerging platforms is also intensifying market pressures.

WBD’s Revenue Estimates Indicate Q4 Growth

The Zacks Consensus Estimate for WBD’s fourth-quarter 2024 revenues is pegged at $10.52 billion, indicating year-over-year growth of 2.31%. The consensus mark for earnings is currently pegged at 7 cents per share, unchanged over the past 30 days.

The Zacks Consensus Estimate for WBD’s full-year 2024 revenues is pegged at $39.76 billion, indicating a year-over-year decline of 3.79%. The consensus mark for the 2024 loss is currently pegged at $4.37 per share, unchanged over the past 30 days.

Microsoft (MSFT) has done it again, dazzling investors with a stellar fourth-quarter fiscal 2024 performance that crushes all doubts. Emerging victorious, Microsoft reported earnings of $2.95 per share, a formidable 1.72% beat over expectations, showcasing a robust 9.7% improvement year over year. Revenues soared to $64.7 billion, marking a 15.2% annual surge, and exceeding the Zacks Consensus Estimate by 0.84%. Dive deeper, and you'll find earnings spike further; at constant currency, they gloriously hiked by 11% year over year.

Commercial Triumph Amidst Sky-High Expectations

Commercial bookings painted a picture of triumph, surging 17% year over year (and 19% at cc), stampeding past expectations. The growth was fuelled by an uptick in mega-contracts worth $10 million and $100 million each, revolving around both Azure and Microsoft 365, all while maintaining stellar performance in core annuity sales motions.

The Cloud Unleashed: Azure's Ascension

Microsoft's Cloud revenues manifested at $36.8 billion, a whopping 21% ascent year over year (up 22% at cc). Azure is akin to a formidable dragon on a gold hoard, lifting the company's overall performance and overshadowing previous expectations.

Segmental Showdown: Numbers That Tell a Tale

The Productivity & Business Processes segment emerged as a formidable force, with revenues soaring 11% (up 12% at cc) year over year, led by Office commercial products and cloud services that witnessed a 12% growth rate. Teams Premium saw a meteoric rise with a nearly 400% surge in seats, a testament to the allure of advanced features.

Meanwhile, the Intelligent Cloud segment carved its path to glory, contributing 44.1% to total revenues with a 19% annual boost. Azure and other cloud services revenue scaled a remarkable 29% growth, including an 8-point surge from AI services — demand that outstrips available capacity.

Lastly, the More Personal Computing segment showcased resilience, raking in a 14% year-over-year revenue increase to $15.9 billion. This rise included a net impact from the Activision acquisition, demonstrating Microsoft's strategic agility in adapting to evolving market trends.

Azure's Triumph at the Heart of the Storm

Azure has asserted its dominance in the cloud domain, spearheading Microsoft's remarkable saga of success. The company's fourth-quarter earnings soar high on the wings of Azure's triumph, painting a vivid picture of victory in the fiercely competitive cloud landscape. Investors are left in awe of Microsoft's relentless pursuit of excellence, as Azure reigns supreme in the clouds amidst a storm of competition, firmly establishing its reign as the Cloud King.

Microsoft's AI Triumph Unveiled in Fiscal Q4 Financials Microsoft's AI Triumph Unveiled in Fiscal Q4 Financials

WBD beat the Zacks Consensus Estimate for earnings in one of the trailing four quarters and missed thrice, the average negative surprise being 525.45%.

Warner Bros. Discovery, Inc. Price and Consensus

Warner Bros. Discovery, Inc. price-consensus-chart | Warner Bros. Discovery, Inc. Quote

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

What Should Investors Do With WBD Stock?

While WBD is making significant strides in its D2C segment and international expansion, its prospects remain challenged by the pressure on its linear TV business and studio underperformance.

WBD currently carries a Zacks Rank #3 (Hold), suggesting that it may be wise for investors to wait for a more favorable entry point in the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Expanding Partner Base Aids WBD’s Prospects

WBD’s Revenue Estimates Indicate Q4 Growth

Warner Bros. Discovery, Inc. Price and Consensus

What Should Investors Do With WBD Stock?

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