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Discovery Inc Class A DISCA

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Morningstar’s Analysis

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Economic Moat




Discovery Reports Better-Than-Expected Q2; Equity Buyback Reinstated Due to Strong Cash Flow

Neil Macker, CFA Senior Analyst

Analyst Note

| Neil Macker, CFA |

Discovery posted a strong second quarter as revenue was in line with and adjusted EBITDA beat FactSet projections. The results reflect the impact of COVID-19 as advertisers deferred or canceled standing orders. We expect that this trend will continue through the third quarter as the firm is exposed to travel and retail in the U.S. Despite top- and bottom-line declines, the firm generated $991 million in free cash flow in the quarter and management will resume its equity-buyback program due to the firm’s strong $1.7 billion cash position. We're maintaining our narrow moat rating and $28 fair value estimate.

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Company Profile

Business Description

Discovery is the one of the largest global media providers with over 2 billion cumulative subscribers in over 220 countries. Its three traditional networks (Discovery, TLC, and Animal Planet) each reach over 85 million U.S. households and more than 200 million international subscribers. The top two networks (HGTV and Food Network) acquired in the Scripps transaction are available in more than 87 million households in the U.S. The international segment consists of national and pan-regional networks over 294 unique distribution feeds in more than 45 languages.

8403 Colesville Road
Silver Spring, MD, 20910
T +1 240 662-2000
Sector Communication Services
Industry Entertainment
Most Recent Earnings Jun 30, 2020
Fiscal Year End Dec 31, 2020
Stock Type Aggressive Growth
Employees 9,200