Warner Bros. Discovery Shares Pummeled After Glum Outlook For U.S. Advertising

Investors bid down shares of Warner Bros. Discovery today as its chief financial officer described a U.S. ad market “that has continued to be weaker than we had hoped” and a recovery that’s hard to predict “with any conviction.”

The shares are down more that 16% at about $9.77 in midday trading after quarterly earnings and commentary.

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“It is becoming increasingly clear now that, much like 2023, 2024 will have its share of complexity, particularly as it relates to the possibility of continued sluggish advertising trends,” CFO Gunnar Weidenfels told a conference call with Wall Streeters after the numbers. International markets “remain more stable” in comparison to the U.S., he said, and streaming advertising is solid.

But ad revenue at WBD’s Networks segment fell to $1.7 billion, from $1.9 billion for the three months ended in September from the year before. “The state of the overall linear [market into] the second half of this year has been disappointing,” Weidenfels said. “And looking ahead, while it is early, the timing of an ad recovery is currently difficult for any of us [to predict] with any conviction.”

The situation could impact WBD’s gross leverage target as it continues to chip away at a hefty debt load — meaning the target could be out of reach “without a meaningful recovery” in the market. “We remain hopeful,” he said.

Asked about this during a Q&A, the CFO said he didn’t necessarily “intend to guide down.”

“The only reason I brought this up is that we had guidance out there hitting our leverage target range by the end of next year. And again, based on the early indications that we’re seeing from the market right now, I’m just not confident to stand here today and say, ‘Don’t worry about it, we’re definitely going to hit that range’.”

“We’re going to have a great year. I’m just not in position right now to provide firm guidance.”

WBD’s third quarter was mixed with Barbie coin and free cash flow beloved by Wall Street offset by said sluggish advertising, and the impact of the actors’ strike on one of the industry’s biggest content creators.

WBD’s total company revenue of $9.98 billion nosed up 1%. Its net loss narrowed to $417 million.

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