Warner Bros (WBD) stock sits at a key support level

By:
on Mar 21, 2024
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  • Warner Bros. Discovery’s market cap has crashed to about $20 billion.
  • The company is facing major headwinds as growth slows.
  • It is also one of the most indebted companies in the media industry.

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Warner Bros. Discovery (NASDAQ: WBD) stock price has been in a freefall this year as concerns about the company’s future remain. The stock has crashed by more than 23% this year, lagging the Nasdaq 100 and S&P 500 indices, which have surged to their record highs. 

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It has also underperformed other media companies. Netflix has jumped by 28% this year while Disney is up by over 20%, making it the best-performing company in the Dow Jones index

Why Warner Bros. Discovery is struggling

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Warner Bros. Discovery is struggling because of how the media industry has evolved. While the streaming industry is growing, the pace of this growth has eased modestly in the past few years.

Warner Bros. Discovery is a major player in the streaming industry because of its HBO Max business. The most recent results showed that the Max service, which was bundled with Discovery+ has over 90 million users.

These numbers mean that it is the third-biggest streaming giant in the industry after Netflix and Disney+, which have over 260 million and 150 million users. 

The challenge is that Warner Bros. Discovery is also in the linear television industry, which is shedding users through cord-cutting. It owns companies like CNN, Food Network, OWN, TNT Sports, and Cooking Channel.

All these channels were highly popular in their prime years. However, the reality is that most people, especially the young ones, are not watching them any more. Most of these people are spending most of their time in YouTube and other social media platforms.

There are also concerns about the company’s substantial debt. It is one of the most indebted companies in the industry with over $44.2 billion in gross debt. While this is a big number, the firm has already paid over $12 billion of it in the past two years. 

This debt is also not a big concern for now. Most of this debt is now fixed for 15 years and there is only $1.8 billion of it outstanding this year followed by $3.1 billion and $2.3 billion. 

Further, there are issues about how it will achieve growth across all its business. This will be a tough thing considering that the company is also seeing elevated content production costs.

What next for WBD stock?

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Warner Bros

WBD chart by TradingView

The daily chart shows that the WBD share price has been in a constant downward trend in the past few years. It recently dropped below the important support level at $8.83, its lowest point in 2023.

The stock has crashed below the descending trendline, which connects the highest swings since February last year. It has also plunged below the 50-day and 100-day Exponential Moving Averages (EMA).

It has formed a descending triangle pattern, which is a bearish sign. The MACD has remained below the neutral point.

Therefore, the outlook for the stock is mildly bearish, with the next point to watch being at $7.50. This bearish view is supported by the fact that the company has no major growth catalysts ahead.

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