Warner Bros. Discovery Posts Another Weak Quarter as Ad Revenue Tumbles; Cutting FVE to $30

Warner Bros. Discovery reported weak third-quarter results with proforma revenue excluding currency effects down 8% year over year. The firm's second quarter as a combined entity suffered from weak advertising results at the networks segment. While we expect all linear TV networks to feel the pain from the ad market slowdown over the next few quarters, WBD will likely be hit harder than most as the legacy Discovery networks are more dependent on ad revenue than peers like Disney that have a higher percentage of linear revenue from affiliate fees. We are lowering our fair value estimate to $30 from $40 due to lower forecast revenue growth in 2022, slower top-line rebound in 2023, and operating income losses continuing into 2023.