Warner Bros. Discovery, Inc.

This is our first report on global media behemoth, Warner Bros. Discovery. The company had a dismal fourth quarter and failed to meet the revenue expectations as well as the earnings expectations of Wall Street. Its losses were significantly wider than expected. Despite significant costs associated with the acquisition and integration, the company provided over $3.3 billion in reported free cash flow in 2022, a healthy conversion in an environment that was becoming more difficult. In terms of direct-to-consumer, they are successfully moving towards their objective of realizing profitability in streaming, a significant and potent part of their business. Losses were reduced significantly in Q4. Besides that, they completed the new distribution contract that put HBO Max again on Amazon Prime video channels. Discovery also renewed contracts that accounted for 30% of its U.S. affiliate’s revenues on the traditional side. The company signed content agreements with Roku and Tubi, adding hundreds of its TV episodes and movies to these well-known platforms to maximize the reach and overall value of its content. We initiate coverage on the stock of Warner Bros. Discovery, Inc. with a ‘Hold’ rating.