Wall Street has its eyes on Warner Bros (NASDAQ: WBD) as the stock becomes one of the most actively traded equities on the market, driven by a surge in volume and price.
Despite a turbulent year in which WBD shares have fallen over 27%, recent developments have sparked renewed interest among investors.
According to the latest market data, WBD ended the September 13 trading session valued at $8.43, a gain of over 10% for the day, with a market cap of $20.81 billion.
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WBD’s current valuation is supported by a trading volume of over 57.7 million shares, higher than its three-month average of 32.33 million.
Despite its smaller market capitalization, Warner Bros’s trading volume metrics have earned it a spot on the ‘most active’ stocks list alongside market leaders such as Nvidia (NASDAQ: NVDA), Tesla (NASDAQ: TSLA), and Palantir Technologies (NASDAQ: PLTR), as per TipRanks.
This feat has seemingly captured market attention, and the immediate question is why the stock is gaining on several fronts.
Why is WBD soaring?
In this regard, there remains a possibility that WBD capitalized on the second week of September’s market recovery, which saw most equities shake off the selloff recorded in the first seven days of the month. Besides building on this momentum, the entertainment entity was boosted after a distribution deal with Charter Communications (NASDAQ: CHTR).
Under the deal, Warner Bros Max streaming service, among other products, will be hosted on Charter’s Spectrum cable TV platform. The collaboration stipulates that Max’s ad-lite service, which includes Max, HBO, and Discovery+ content, will be part of the Spectrum Select TV packages at no extra charge.
With WBD moving on the news, it’s a welcome development, considering the stock faced significant volatility in 2024, highlighted by the loss of the NBA streaming rights.
The company is also emerging from a challenging Q2 2024, where revenue plunged 6% year-over-year to $9.7 billion, with a net loss of $1 billion. The firm’s studio arm was down 5% to $2.5 billion, networks down 8% to $5.3 billion, and direct-to-consumer (DTC) streaming down 2.6% to $2.6 billion.
Wall Street turns bullish on WBD
While Warner Bros has had a challenging year, Wall Street analysts are placing a bullish bet on the equity, predicting double-digit gains in the next 12 months. In a bullish environment, the 17 analysts at TipRanks project that WBD will likely trade at an average share price of $12.50 in the next year, representing an upside of 68% from the current valuation. The experts have set a high target of $17 and a low prediction of $7.
They are also exhibiting caution, with 10 providing a ‘moderate buy’ rating and six recommending holding the equity.
Other analysts take on WBD
Despite the bullish outlook, not all experts are optimistic about the entertainment company’s prospects, citing weak fundamentals. One of these experts is Ashley Schulman from Running Point Capital, who observed in August that the loss of the NBA deal was a significant blow.
“Strong streaming subscriber growth is not enough to make up for weakening fundamentals, the loss of NBA broadcast rights, advertising weakness, and misses across free cash flow, revenue, EBITDA, and earnings,” Schulman said.
In another bearish call, Bernstein analyst Laurent Yoon urged investors to remain cautious about the company, citing a poor second quarter. Yoon pointed to investor frustration with the company’s failure to keep up with the legacy TV business as streaming struggles to impress. In this regard, the expert downgraded the price target from $10 to $8.
Finally, although Wall Street analysts are bullish on WBD, key concerns remain regarding the company’s business model that needs to be addressed. Warner Bros needs to reassure investors of its ability to turn things around and return to profitability, especially in its three core business segments: studio, networks, and DTC.
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Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
