1 entertainment stock to avoid buying in 2022

On September 13, 2022, entertainment and media giant Warner Bros. Discovery, Inc. (WBD) laid off 100 employees from its ad sales department as part of its cost-saving measures. In addition, the company’s huge loss in its second quarter has generated negative investor sentiment.

Over the past month, the stock has lost 5.5% to close the last trading session at $12.09. It has lost 49.1% so far this year and 54.7% in the last year.

Here’s what could shape WBD’s performance in the short term:

gloomy final performance

WBD’s total revenue increased 220.9% year-over-year to $9.83 billion for the second quarter ended June 30, 2022. However, its net loss was $3.42 billion compared to revenue of $672 million in the period. previous. Additionally, its loss per share was $1.50, compared to EPS of $1.01 in the same period a year ago.

Negative profit margins

12-month follow-up WBD gross profit margin of 45.90% is 9.1% lower than the industry average of 50.52%. Its trailing 12-month EBIT and net profit margins of negative 1.38% and 14.32% are lower than the industry averages of 9.27% ​​and 5.73%, respectively.

In addition, its ROCE, ROTC, and ROTA for the last 12 months of negative 8.98%, 0.24%, and 1.95%, compared to industry averages of 6.66%, 3.58%, and 2 .47%, respectively.

Unfavorable EPS estimates

Analysts expect WBD’s EPS to decline 154.2% year-over-year to a negative $0.13 for the quarter ending September 2022. Additionally, its EPS is expected to decline 128.7% year-over-year to Negative $0.50 in 2022. The stock missed EPS estimates in the rear four quarters.

POWR Ratings Reflect Gloomy Outlook

WBD has an overall rating of F, which equates to a strong sale on our property POWR Ratings system. POWR ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

WBD is rated D for quality, consistent with its lower-than-industry profit margins.

Additionally, it is rated D for Growth and Stability, in keeping with its dismal bottom line performance in its last reported quarter and beta of 1.38, respectively.

in stock 16 Entertainment – Media Producers industry, WBD ranks last. The industry is classified F.

Click here for additional POWR Ratings for WBD (Courage, Drive and Feeling).

See all the major stocks in the entertainment industry: Media Producers here.

Bottom line

WBD reported a dismal final performance in its latest reported quarter. In addition, the EBITDA of the stock decreased at a CAGR of 9.7% in the last three years. Given the gloomy expectations of analysts, the WBD is best avoided in 2022.

How does Warner Bros. Discovery, Inc. (WBD) compare to its peers?

While WBD has an overall POWR rating of F, one might consider looking at its industry peer, News Corporation (NWSA), which has an overall rating of B (Buy).

Shares of WBD were trading at $12.09 per share on Monday afternoon, up $0.11 (+0.92%). Year-to-date, WBD is down -52.59%, versus a -23.06% rise in the benchmark S&P 500 index over the same period.

About the author: Riddhima Chakraborty

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master’s degree in economics, she helps investors make informed investment decisions through her insightful commentary. Plus…

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