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

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Steven Cahall cut his price target to $19 from $42.

Bing Guan/Bloomberg

Warner Bros. Discovery stock tumbled Friday after the entertainment company posted disappointing financial results and an analyst from Wells Fargo voiced concerns over its performance in the near term.

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

Wells Fargo analyst Steven Cahall downgraded his rating for Warner Bros. Discover (ticker: WBD) to Equal Weight from Overweight, cutting his 12-month target for the stock price to $19 from $42. Cahall cited the recent earnings report and near-term challenges as reasons for the downgrade in a research note.

The outlook provided by management shows that Warner Bros. Discovery is “going through a lot of post-merger growing pains,” he wrote in a research note. “The assets are great, but the risks and capital structure create a greater range of outcomes.”

“Succeeding in streaming is hard enough, so we prefer names without the added baggage for now,” he added.

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

Write to Angela Palumbo at angela.palumbo@dowjones.com