3 Reasons to Hold WBD Stock Now Despite a 67.7% Year-to-Date Rally

Core Insights - Warner Bros. Discovery (WBD) has seen a 67.7% increase year-to-date, outperforming the Zacks Broadcast Radio and Television industry and the Zacks Consumer Discretionary sector, which rose by 30.4% and 4.7% respectively, driven by improved content monetization, debt reduction, and operational efficiency [2] - Despite the positive momentum, investor sentiment remains cautious due to ongoing restructuring and competitive pressures, leading to a preference for holding positions rather than increasing exposure [2] Year-to-Date Performance - WBD's growth strategy is anchored in its two core engines: Studios and Streaming, which are essential for long-term content monetization [5] - The Studios division has focused on quality and efficiency, rebuilding its production slate with established franchises and original IP, aiming for consistent returns across various revenue streams [6] Streaming and Studios Momentum - The streaming business is evolving towards sustainable profitability, with HBO Max shifting from subscriber-led growth to a profit-oriented model through advertising and geographic expansion [7] - The Zacks Consensus Estimate for WBD's third-quarter 2025 streaming revenues is projected at $2.74 billion, reflecting a 4.1% year-over-year increase, while Studios revenue is estimated at $3.16 billion, indicating a 17.8% year-over-year increase [8][9] Separation Strategy - The planned separation of WBD into Warner Bros. (Studios and Streaming) and Discovery Global (Linear Networks) aims to enhance operational focus but introduces near-term uncertainty [10] - In Q2, WBD retired $17.7 billion of bonds, reducing gross debt by $2.7 billion, although the associated bridge-loan facility incurs higher interest costs, impacting free cash flow until the separation is complete [11] Competitive Landscape - WBD operates in a highly competitive media landscape, facing challenges from Netflix, Disney, and Amazon, which have established strong market positions and diversified monetization strategies [13][14] - WBD trades at a forward 12-month price-to-sales multiple of 1.17X, significantly lower than the averages of its peers, reflecting investor caution regarding its ongoing separation and financing costs [14] Conclusion - WBD's improving execution in studios and streaming, along with progress in deleveraging, supports its long-term recovery potential, but competition and limited earnings visibility continue to affect sentiment [18] - The stock trades at a discount to peers, indicating value but lacking near-term catalysts for re-rating, suggesting a hold strategy until uncertainties are resolved [18]