Discovery Ends Stand-Alone Era With Decent Top-Line Growth; Streaming Posts Strong Results

Warner Bros. Discovery reported first-quarter results that reflect only the Discovery side. While the Discovery business posted decent top-line growth, the focus has already shifted to the new combined firm. Discovery+ added 2 million new direct-to-consumer subscribers in the quarter and HBO Max added 3 million, meaning that the new firm ended the first quarter with over 100 million streaming customers across its platforms. The combined net adds were relatively strong, given that market leader Netflix lost 200,000 subscribers in the same quarter. We think the potential combination and/or bundle of HBO Max and Discovery+ along with increased global expansion will spark growth for Warner Bros. Discovery. We are maintaining our narrow moat rating and $40 fair value estimate.