Why Is Warner Bros. Discovery (WBD) Stock Down Today?

Today, shareholders in Warner Bros. Discovery (NASDAQ:WBD) are licking their wounds once again following yesterday’s earnings call. Shares of WBD stock are down approximately 5% at the time of writing.

The logo of the new Warner Bros Discovery (WBD) company on smartphone screen.
Source: Jimmy Tudeschi / Shutterstock.com

Indeed, this week has been a rough one for shareholders in this media giant. This week’s shutdown of the company’s CNN+ app led to some serious concerns around the company’s long-term streaming strategy. For many, the ability for this high-profile merger between Warner Bros. and Discovery to work relied on a successful streaming strategy.

As most investors know, it’s also earnings season. And with earnings comes volatility. On this front, there’s some bearish news that’s being priced into WBD stock. Let’s dive into what’s taking this stock lower right now.

WBD Stock Sinks on Cautious Outlook

Today’s decline in WBD stock appears to be a continuation of yesterday’s trading, following a less-than-enthusiastic earnings report and conference call. On yesterday’s conference call, the company’s CFO warned investors to expect weaker profit and cash flow guidance than what was expected for the full year.

In this forward-looking market, guidance can matter more than results. This appears to be the case for Warner Bros. Discovery, as investors price in what future quarters could look like.

Driving this negative outlook are complications from what appears to be a messier merger than many initially expected. Additionally, the shift in the company’s focus away from streaming is what the company’s CEO believes could be a smart move. That’s because Warner Bros. Discovery has called for “streaming austerity,” as companies tighten their pocketbooks in a bid to bolster profitability in this environment.

What that means for the company’s HBO Max product remains to be seen. However, tighter budgets and a focus on profitability can be viewed two ways. On the one hand, prudent financial measures are generally a good thing. On the other, a lack of spending on content could result in market share losses for the company’s existing streaming business.

Right now, I think this is a stock investors need to let the dust settle on.

On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.

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