Warner Bros. Discovery (WBD.US) Downgraded by Bernstein

Warner Bros. Discovery (WBD.US) was downgraded by Bernstein analysts from Outperform to In-Line, with a price target cut to $8 from $10, a 13% increase from current levels. The entertainment company has a long way to go after a "disappointing" second-quarter report, the firm said.

Warner Bros. Discovery's second-quarter key financial metrics were all below expectations, the firm said, and the stock has fallen nearly 70% since the merger, making it the worst performer in the group along with Paramount Global-B (PARA.US).

The firm said in a Monday note: "Given the quality of Warner Bros. Discovery's IP and studio, this is very disappointing. The long-term challenges facing its cable business and the small size of its direct-to-consumer (DTC) business are the culprits, and investors are frustrated by its uncertain future and expected management."

"Second-quarter revenue was down 6%, Ebitda was down 16%, and free cash flow was down 43%. While absolute debt is down, leverage remains at a high 4x due to Ebitda declining from 2023, which sounds bad and is indeed bad."

"Investors have little patience left for Warner Bros. Discovery given the continued deterioration in the environment, which has been further exacerbated by the uncertainty around losing the NBA broadcast rights, which has been Paramount's most valuable franchise property for nearly 40 years."

WBD.US is down 38% year-to-date, while the S&P 500 is up 14%.