Warner Bros. Discovery Falls as Most Stocks in S&P 500 Downgraded to ‘Post Merger Growing Pains’

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Steven Kahl lowered his price target from $42 to $19.

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Warner Bros. Discovery stock fell on Friday after the entertainment company posted disappointing financial results and a Wells Fargo analyst expressed concern over its near-term performance.

Warner Bros. Discovery (ticker: WBD) reported its results as a combined company for the first time on Thursday, posting losses when analysts expected gains. Ebitda, or adjusted earnings before interest, taxes, depreciation and amortization, was below Wall Street’s consensus. And management lowered its forecasts for EBITDA in 2022 and 2023, citing a “less favorable macroeconomic background.”

Wells Fargo analyst Steven Kahl downgraded his rating for Warner Bros. Discover (ticker: WBD) from overweight to equal weight, slashing his 12-month target for the stock price from $42 to $19. Kahl cited recent earnings reports and near-term challenges as reasons for the decline in a research note.

The outlook provided by management suggests that Warner Bros. Discovery “is going through growing pains after the merger,” they wrote in a research note. “Assets are great, but risk and capital structure create a huge range of consequences.”

“It’s hard enough to be successful in streaming, so we prefer names without the extra stuff for now,” he said.

The stock fell 16% to $14.60 on Friday afternoon, making it the biggest drop in the S&P 500. The stock was on pace for its biggest percentage decrease since March 2021. Shares of Warner Bros. Discovery have fallen 26% in 2022.

Write to Angela Palumbo at [email protected]