The Warner Bros Discovery stock price rose and then erased those gains on its first day as a publicly-traded company. The WBD stock rose to a high of $26.20 and then declined to a low of $23.90. The AT&T stock price also jumped by more than 7% as investors cheered the success of the spin-off. So, what next for the Warner Bros shares.
Warner Media Bros Discovery is a new company formed by the merger of Discovery and Time Warner. Time Warner is a company that AT&T acquired about four years ago in a $85 billion deal. At the time, the company’s goal was to create a giant media streaming company to compete with the likes of Disney and Netflix.
To a large extent, the deal was a failure, which pushed AT&T to quickly wind it down. The company’s streaming service ended 2021 with over 73 million subscribers and the company expects that it could double that in the coming years. Netflix has over 230 million users globally while Disney+ has over 130 million members.
While HBO has a good number of users, AT&T believed that continuing the service would have taken a lot of money in content development. For one, Netflix spends over $18 billion per year while Disney plans to spend about $33 billion on content this year. Therefore, that outflow of cash would be substantially high for a company that is mostly owned for its dividend.
The new Warner Media Bros Discovery is made up of some well-known brands like HBO Max, CNN, CNN+, TNT, TBS, Animal Planet, Turner Classic Movies, and Investigation Discovery among others.
It is too early to determine whether the WBD stock price is a buy for now. However, in my view, I expect that the share will struggle in the coming days as investors evaluate its performance and the synergies of the two firms. Most importantly, as shown below, it has been a tough time for media stocks with shares of companies like Netflix, Paramount, and Disney have not done well in the past few days.
This post was last modified on Apr 12, 2022, 14:13 BST 14:13