Today we look into Warner Bros Discovery Stock (WBD stock). I think that WBD stock is under-appreciated by the market and is partially facing headwinds due to Netflix's most recent disappointing quarter. WBD stock is a buy because it is a growing free cash flowing company with a more than reasonable valuation, and they have a strong pipeline with many short & long-term catalysts.
Discovery’s content spans genres such as documentaries, history, exploration, nature, sports, health and kids. If you look at what HBO and Time Warner currently offer, it’s completely different from Discovery. HBO and Time Warner own massive brands like Harry Potter, Game of Thrones, Lord of the Rings, DC and Friends. Mixed together, it creates a holistic multi faceted offering for an entire family. Last summer, Discovery+ even covered the Olympics on demand, which drove new subscribers. The merger will also include CNN+, which launched on March 29th. In such a competitive market, their moat is their content offering. Unlike Netflix, both parties within this merger own their content, which is a significant value add because it increases their margins.
But together, Discovery will give HBO the infrastructure and focus it needs to become an international industry leader. And both companies, together, will have the makings of a media giant which can easily reach 150-200M subscribers together, the likes of giants like Netflix and Disney.
With regards to margins, due to the rollout of Discovery+ and the merger, SG&A and marketing expenses have been higher. Over the long-term, these costs will evaporate. What’s encouraging is that they are still FCF positive, despite these higher costs.
#WBD #StockAnalysis #DIS #NFLX #WarnerBrosDiscovery
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