It’s been a sad week for Warner Bros. Discovery, Inc. (NASDAQ:WBD), who’ve watched their investment drop 12% to US$18.15 in the week since the company reported its first-quarter result. Revenues were US$3.2b, approximately in line with what the analysts expected, although statutory earnings per share (EPS) crushed expectations, coming in at US$0.69, an impressive 303% ahead of estimates. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. With this in mind, we’ve gathered the latest statutory forecasts to see what the analysts are expecting for next year.
View our latest analysis for Warner Bros. Discovery
Taking into account the latest results, the most recent consensus for Warner Bros. Discovery from eleven analysts is for revenues of US$48.9b in 2022 which, if met, would be a substantial 290% increase on its sales over the past 12 months. The company is forecast to report a statutory loss of US$0.96 in 2022, a sharp decline from a profit over the last year. Before this earnings announcement, the analysts had been modeling revenues of US$42.2b and losses of US$1.10 per share in 2022. We can see there’s definitely been a change in sentiment in this update, with the analysts administering a sizeable upgrade to this year’s revenue estimates, while at the same time reducing their loss estimates.
There was no major change to the consensus price target of US$37.13, perhaps suggesting that the analysts remain concerned about ongoing losses despite the improved earnings and revenue outlook. Fixing on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company’s valuation. There are some variant perceptions on Warner Bros. Discovery, with the most bullish analyst valuing it at US$52.00 and the most bearish at US$18.00 per share. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. It’s clear from the latest estimates that Warner Bros. Discovery’s rate of growth is expected to accelerate meaningfully, with the forecast 5x annualized revenue growth to the end of 2022 noticeably faster than its historical growth of 11% pa over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 11% per year. Factoring in the forecast acceleration in revenue, it’s pretty clear that Warner Bros. Discovery is expected to grow much faster than its industry.
The Bottom Line
The most important thing to take away is that the analysts reconfirmed their loss per share estimates for next year. Happily, they also upgraded their revenue estimates, and are forecasting revenues to grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for Warner Bros. Discovery going out to 2024, and you can see them free on our platform here.
You should always think about risks though. Case in point, we’ve spotted 3 warning signs for Warner Bros. Discovery you should be aware of, and 2 of them are significant.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
