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Analyst trims WBD expectations

August 9, 2022

Analysts from MoffettNathanson (MN), having examined in some detail the pro-forma numbers from Warner Bros Discovery (WBD) are concerned. WBD says its EBITDA guidance for 2023 will be about $12 billion (€11.7bn), and thus two billion less than previously expected. MN says even these reduced numbers are dependent on profits from linear cable networks which are under increasing pressure in a declining pay-TV ecosystem.

“While outright subscriber growth will not be the singular driving focus, the company did provide a goal of reaching 130 million paid subscribers by 2025, up from the 92 million combined adjusted subscribers today,” notes MN, and cautions that even with a multiple of 15x on direct-to-consumer profit targets this would translate to only $15 billion by 2025.

The analysts are therefore reducing their expectations model, with 2022 EBITDA trimmed by $1 billion from $10.2 billion to $9.2 billion, and 2023 EBITDA to $11.8 billion (from their own previous estimates of $12.6 billion) and WBD’s own $12 billion guidance.

MN concludes with a share price target for WBD of $18 (against trading last week of about $17.48) although says anxieties over WBD’s elevated debt load, macro headwinds and growing secular pressures from faster cord-cutting along with still some uncertainty around key strategic questions to create an overhang for shares.

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