Warner Brothers Discovery Earnings: Weak Advertising and Sluggish DTC Subscribers Weigh on Results

Warner Brothers Discovery continues to make significant progress in reducing costs, increasing cash flow, and paying down debt. However, third-quarter results show that it has not yet hit its stride with its evolving direct-to-consumer, or DTC, business, and a weak advertising environment weighed on networks revenue, which is still the firm’s biggest segment. Considering its evolving DTC offering and the potential effect of the actors’ strike, we are not reading too much into the quarter’s weaknesses, and we are maintaining our $25 fair value estimate.