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Why Warner Bros.  Discovery (WBD) down today?


Today, the shareholders of Discovery of Warner Bros. (NASDAQ:WBD) are licking their wounds again after yesterday’s results call. Shares of WBD are down around 5% at the time of writing.

Source: Jimmy Tudeschi/Shutterstock.com

Indeed, this week has been tough for the shareholders of this media giant. The shutdown this week of the company’s CNN+ app has raised serious concerns about the company’s long-term streaming strategy. For many, the ability of 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 profits comes volatility. On this front, there is some bearish news that is priced into WBD stocks. Let’s dive into what is driving this stock down right now.

WBD Stock Sinks on Cautious Outlook

Today’s decline in WBD shares appears to be a continuation of yesterday’s trading, following a lackluster earnings report and conference call. During yesterday’s conference call, the company’s chief financial officer warned investors to expect weaker earnings and cash flow forecasts than expected for the full year.

In this forward-looking market, advice may matter more than results. This seems to be the case for Warner Bros. Discovery, as investors gauge what future quarters might look like.

At the root of this negative outlook are the complications of what appears to be a messier merger than many initially anticipated. Additionally, the company’s shift in focus away from streaming is what the company’s CEO thinks was a smart move. That’s because Warner Bros. Discovery called for “streaming austerity” as companies tighten their portfolios in a bid to bolster profitability in this environment.

What this means for the company’s HBO Max product remains to be seen. However, tighter budgets and an emphasis on profitability can be viewed in two ways. On the one hand, prudent financial measures are generally a good thing. On the other hand, a lack of content spending could lead to 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.

As of the date of publication, Chris MacDonald had (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.

Chris MacDonald’s love of investing has 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 investment outlook.

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