That’s All Folks?

I pulled the trigger on Warner Bros Discovery last week, a stock that’s in a 70% drawdown from its prior highs and a regular on the 52-week low list. The negatives here are obvious: Huge debt load, uncertainty about the economics of streaming, major competition from Disney / Hulu, Netflix, Peacock and everyone else, a crash in viewership for traditional linear television, etc.

Those are big issues and they’re not going away anytime soon. They perfectly explain why this stock has collapsed from 25 bucks to the mid-single digits. They perfectly explain a wipeout in market capitalization from over $60 billion to less than $20 billion in just couple of years.

But I think there are some signs of hope on the horizon. I’m not overly optimistic but willing to bet that a large part of this story has been de-risked. Also, I have a stop loss in place, so if these glimmers of hope turn out to be ephemeral, or the industry conditions get worse, I will be dragged out of this thing at a minor loss.

So I guess we shall see what happens.

For the bull case on Warner Bros, which owns HBO and the Max app (100 millions subscribers), I think about how much the company is under-earning on some of their marquee properties like Batman, Superman and the whole DC Universe, not to mention Harry Potter, Game of Thrones and Lord of the Rings. They’re getting serious about the properties again and it wouldn’t take much to shift the narrative. There’s also the potential for the positive resolution of their NBA relationship (TNT will practically live or die as a result of it). Plus, they’ve gotten very good at paying down debt and reducing costs, both of which were long overdue.

As a reminder, I don’t typically search for investing ideas on the 52 week low list but between this one and Pfizer, I am actually starting to get a little concerned - am I turning into a value investor? Perish the thought!

I talked about this company’s prospects with an expert this week…

Great Quarter Guys!

You guys loved the first edition of Great Quarter Guys! which we published this during the last earnings season, so this quarter we brought it back. Our special guest this time is Julia Alexander of Parrot Analytics, one of the foremost authorities on all things streaming.

Julia absolutely rocked the show, delivering insights on Netflix, Disney, Paramount and, of course, Warner Bros Discovery. You can watch her below or hit the link for the audio podcast below that and listen instead. And you should, because we packed a ton of killer information into this one.

Listen here:

Just so all the bases are covered, of course nothing I say here is meant to be investment advice for you. Nor is it a solicitation to buy or sell any security. For thousands of words disclaiming everything under the sun, go here:

Blog Disclaimers

Okay, talk soon - Josh