• by Wayne Friedman , November 7, 2024

Building on strong quarterly results from its overall streaming business, Warner Bros. Discovery witnessed a sharp 12% rise in its stock price.

Global direct-to-consumer (D2C) subscribers rose 7.2 million to total 110.5 million. In the U.S., streaming subscribers were essentially flat to a total 52.6 million.

D2C revenue was up 8%to $2.6 billion -- with the business more than doubling its cash flow (adjusted earnings before interest, taxes, depreciation and amortization) to $289 million from $111 million.

Media analyst for Guggenheim Securities Michael Morris listed the company as a “buy,” primarily due to even better “bright spots” driven by subscribers and profits for streaming business in subsequent periods.

On Thursday, WBD’s stock was up 12% to $9.37.

D2C revenue improvement came from distribution (subscription fees) revenue, up 6% to $2.3 billion. The average monthly revenue per global user was essentially flat at $7.84. In the U.S. and Canada, the average monthly revenue per user rose to $11.99 (versus $11.29) -- although it was down $12.08 from the second quarter of 2024.

Overall company revenue fell 3% to $9.6 billion. However, the company posted $135 million in net income -- a reversal of the $417 million net loss in the third quarter of 2023.

Traditional media legacy business -- TV networks and movie/TV studio content -- faced more challenges, and TV network distribution and advertising revenue was down 8% (to $2.6 billion) and 13% (to $1.5 billion), respectively.

Distribution was down due to continued pay TV cord-cutting by subscribers.

Advertising saw a 21% decline in network audiences amid a weakening, soft linear TV ad market, and studio revenue was down 17% to $2.7 billion. This was largely attributable to the results of two summer WBD movies “Beetlejuice Beetlejuice” and “Twisters,” which posted sharply lower revenues compared to the blockbuster "Barbie"of  a year ago. 

TV content sales were up 30% -- an improvement over the year-ago period when writers' and actors' strikes halted much production.

“Management expects similar D2C subscriber, revenue, and profitability trends in the fourth quarter,” says Morris. He adds that company executives have forecast next year’s cash flow will “meaningfully exceed” $1 billion, but is concerned about the company’s $40 billion in debt “as a potential challenge.”

During the WBD earnings phone call, executives said they see the potential as well as the need for consolidation, according to Morris.