The timing on this buy was absolutely not great, that dump into the last half hour of the day yesterday was unexpected and went much further than I thought it would on this ticker. We even slightly dipped below $12 first half of today (hopefully just the first half, but it’s a close one, pretty much sitting right on $12, where I am looking for some temporary support to build).
With that in mind and a good amount of time left on the contract, I’m still cautiously holding the call in the hopes that this is just starting a new, slightly lower range; e.g. on the daily the wick highs falling at $13-$13.10 instead of $13.50ish up to ~$14, and a new ‘standard’ intraday price closer to $12-12.50 than $12.50-$13.25. Looking mainly at the 8/9 (end of previous drop, similar candle to yesterday, though it was preceded by major red) and the 9/8 (previous 52 week low) Daily candles here when thinking of how this may react going forward.
I of course am now wondering if a drift down to $10 before November ER is finally starting though…very possible, as unfortunately today wasn’t a day where WBD went against the market to hold that pattern, so I am just monitoring the situation/price action for now, looking for a bounce back into a range/pattern before Wednesday at the latest, but more ideally that would be starting tomorrow or Monday. If not, the range may be broken definitively and I’ll just have to take the L on this call and pivot to adapt to the new PA.
I was hoping for a test of $10 too, though I didn’t want it to start the one time I have a unhedged call outside of paper accounts! Monkey paw stuff right here, lol. Also wasn’t the smartest idea to take a call EoD (not EoD enough, though) after the FOMC rate hike speech…my thoughts were how WBD had a habit of ignoring the market on days when it was going the other way against that pattern, and yesterday’s catalysts we’re just too strong to go against. It may still pop back into range, letting the dust settle right now, but I’m not quite seeing that today as I had hoped (though it also isn’t a total breakdown, let’s see some support for a day or three ); but if that market-ignorance-in-favor-of-range WBD has been pulling doesn’t pop back into place within the next few trading days then it’ll be time to bail on this call and look for a new pattern/range while prepping for ER. I probably would have cut it already if this was a more market correlated, higher risk ticker/contract, but just as the gains were muted, so is the loss, so I will give this a few days to shake out and find itself a new range, or fall out of it completely.
I definitely wouldn’t take any other additional positions or entries today though, if I wasn’t already in this and looking for an entry I’d either wait for puts around $13 or see if this drop follows through and then where the support gets built out between $10 and here ($12). I don’t think it’ll dip under $10 before ER, though I also don’t think it’ll test $13.50-14 very much again before it either. Mayyybe $13.50 taps, but I can see that as the new absolute top til ER, certainly not tapping $14 like it had been at the ‘peaks’. Still way too early to say for sure one way or the other though, it’s looking bearish.
Really not much to see here for now, if we do close a Doji or hammer today I’m very much hoping for similar reactions to the 9/8 candle. Hourly is a mess now though, so it really can go either way, probably with a ~60/40 favor towards the bear side. Just not quite enough for me to buy a put down here though, looking elsewhere to ‘hedge’ this call I have while I wait for the price action to come to a conclusion on where it’s going.
Took the L, bad timing buying in. Will watch for where this lands over the next few days and whether or not a new pattern forms or volatility just kicks up going towards expected ER dates.
Not too much happening here this weekend, though some eyes are on the release of a film called Don’t Worry Darling. Rather, eyes are on the supposed dramas behind the scenes. Warner execs have come out and denied the rumors this weekend, but gossip-y sites are running with it. Probably not too much to shake things up here on the ticker, though I am looking at whether ticket sales exceed the $35 million budget or not.
So far the film has grossed $3 million on Thursday showings, with another $19 million projected for this weekend. This would be a strong opening if confirmed, but the main question seems to be on whether it will follow through or not, obviously. The film itself apparently isn’t that great, garbage by some accounts, with low scores from both critics and audiences, but Hollywood rags are wondering whether this may become a morbid curiosity film that draws in viewers because it’s bad and has drama surrounding it.
Olivia Wilde and Shia La-Boof () seem to be the outspoken one and subject of curiosity, respectively.(Hey hey, I’ve seen this one before!)
Really not much worth posting here trading wise off this story, but here it is if anyone’s curious.
To reiterate, mainly watching this the next couple weeks not for the drama, but to see if this makes back or exceeds it’s budget (again, $35m budget, projected $22m total this weekend)
This next one could be interesting, Mel Gibson seems to be getting a bit antsy about Lethal Weapon 5’s shooting. Lethal Weapon 5 (why, Hollywood, why?) was set to debut on HBO Max before the merger, and while it’s not canned, production has slowed. Mel Gibson had this to say-
It’s [coming along] great, we’ve got a really good screenplay that I developed. Well, Donner developed it, Richard Donner, of course, developed it with Richard Wenk, and they had a really good template. I had the honor of sitting down, after Richard passed away, with the writer and doing a couple more drafts and trying to do it in the spirit of what we thought Donner might [want], because I knew the guy so well. We tried to get that flavor, and we were pretty happy with what we came up with.
The only delay is now with all the shake-up at Warners, with Discovery coming in and the new boss, and they chop everyone else up and throw them away and get new people. It always takes time for these companies to regroup, so that’s been a delay, but I’m pretty confident we’ll get this one up on its feet, probably shoot it in the first quarter of the New Year.
This is the part that has my attention: The only delay is now with all the shake-up at Warners, with Discovery coming in and the new boss (David Zaslav), and they chop everyone else up and throw them away and get new people. It always takes time for these companies to regroup, so that’s been a delay, but I’m pretty confident we’ll get this one up on its feet, probably shoot it in the first quarter of the New Year.
The wording here is slightly hostile in my interpretation, the statement using terms like ‘chop everyone else up and throw them away to get new people’ and calling David Zaslav ‘the new boss’ instead of literally almost anything else lol. More delays and we could see some of that famous Gibson outrage…
So, he’s got some hopium the project will be back on it’s feet by EoY-early 2023. What if it doesn’t? He’s got a famous temper, and this project seems to have been is stuck in development hell. This HBO Max slot seemed set in stone, if it gets canned as well, I wonder what kind of inside details may emerge from an angry Gibson…but this is getting too far into what if’s, let’s stay in the here and now and play what’s in front of us.
But, right now none of this is very ‘sticky’ in my opinion, with FOMC the market finally got ahold of the ticker these past two days (9-20 to 9-22, future reader). Will it continue to move with SPY et al, or will it find itself a new channel to ping in? The performance of this film and then especially the bigger DC stuff starting with Black Adam next month is what I’m watching. When it was back in it’s old $12.50-$13.50 range, the news of House of the Dragon being a major success didn’t do too much, it was totally stuck there in that pattern since the ER drop.
Finally, now, with a new FOMC-grabbed drop, we are in new waters. I was hoping for a drop to roughly $10 and a bounce back up, though if we do end up with a small relief rally this week, will it get stuck back close to that old channel? This week’s performance of WBD will be very important going forward, as it should decide the new holding pattern. Up or down, up or down, I do not know, which is why I cut that call (plus it being near stop loss levels), but I should digress.
I would say hold off any decisions on positions this week unless we’re just reattached to the market, in which case probably just go play the funds and their various offshoots. I’m looking for divergence here. I want a new pattern to set, not just a cheaper, lower Delta SPY call/put. I want to see how these film performances affect the ticker.
There is still so much debt to get through, I don’t see how they pull it off. Also keeping an eye on the potential Comcast merger stuff, though that’s further away, 2023 at the earliest most likely, if at all.
Also next ER apparently sometime in the first week of November, though I haven’t found a date yet; but I have seen lists of ERs that week courtesy of rexxxar in one of the macro threads…WBD was not on that list. Interesting stuff to be watching for, and interesting to see where and how this ticker ends up. New territory time with a few catalysts brewing, this is where the fun begins…
Big rejection at $12 this morning, went green for 10 mins then got rejectedhard. The rejection also conveniently filled a gap left yesterday morning. Will look further into news side of things, but for now the TL;DR is waiting for $10.50, $10 to build support for calls if appropriate, but there are a few potential and definite catalysts upcoming here. ER is the big one in early November, then some film releases and updates on Comcast merger news.
No positions here yet, gonna let it find itself some support
This continued downward with the market today, though not quite into any buy-in territories for me. Did see a new interview on some…uh, news outlets today though; the International President of WBD Gerhard Zeiler laid out some broad details on the plans the company has going forward in a speech at RTS London Convention 2022. Two articles from Variety and Hollywood Reporter. Key takeaways were a possible UK-exclusive streaming service seemingly working with Sky (or possibly against their wishes? The two articles offer their own opinion, but in my opinion the partnership looks fairly solid), and he reiterated WBD’s stance on theatrical releases being not just relevant, but desirable to both the company’s balance sheet as well as us as consumers (maybe… but in this remote-work-is-king environment, are you sure about that? Are you really sure about that’s what they want?)…he seemed adamant on this stance, saying “100% Yes” to theatrical releases/events.
Talking about the potential UK service and theatrical releases, "Global subs aren’t the only KPI any more, it’s also about revenue, it’s about the path to profitability.” (KPI is short for Key Performance Indicator, to those of you about to Google it like I did, lol)
On theatrical releases-
“First of all, everyone who ever believed that the theatrical business – that the cinema – is dead has been proven wrong so many times, and also will be proven wrong in the future […] the theatrical business is here to stay and that’s good.” We don’t believe it makes sense to put all the content we have into one window. We don’t believe it’s what the consumer wants and no one truly believes that this is a good business case. We are not a one trick pony. We believe in the breadth of our distribution strategy.” (Variety)
The theatrical business is here to stay,” Warner Bros. Discovery is saying “100 percent yes” to theatrical windows, and local content is an important complement to global hits.
(Hollywood Reporter)
Otherwise, he talks a bit about the importance of local productions to WBD. This is the first I’ve seen an exec talking about wanting to focus on on-site foreign productions, though this is the International President…at the same time, he kinda points out that the superhero stuff is WBD’s major focus. From the article-
“If you want to be a global player, you have to have relevant local stories,” Zeiler said at the Royal Television Society’s (RTS) annual convention in London on Tuesday morning. “I mean don’t misunderstand me, the big kids will always be the Batmans, the Elvises, the Black Adams, which premieres next month here in the U.K.” He also pointed out that WBD invests in local films, citing productions in Japan and Germany, as well as streaming content.
The Hollywood Reporter article had an interesting tidbit, definitely feeling a little defensive here it seems to me…
"That’s not possible in a creative industry,” he said though when asked if hit films can be predicted with certainty.
The Hollywood Reporter goes into some detail as far as WBD history goes, though a lot of that is covered above. Still, a decent read if you’re just seeing this ticker. These two halves of sentences basically sum up the big hurdle WBD is facing though:
The merged conglomerate is targeting profitable streaming subscriber growth and $3 billion in cost savings…[Zeiler said] "Whoever knows David Zaslav, knows that he is very ambitious, and we are an ambitious company. … We want to be a top 3 media player, and I personally would be really disappointed if there is the number 3 in front of our ranking.”
Yeah, but how? Exactly how, I mean…lots of eggs in this theatrical basket, we’ll see what happens upon that Black Adam film release. Theatrical successes have been the major focus so far (which makes sense, they have films releasing before any new streaming services), the rest seem to be in the whole diversify our audiences thing and offer them multiple streaming services. (…yay? :–|)
Overall, “we don’t believe that it makes sense to put all the content we have into one window,” Zeiler highlighted, arguing that was not what consumers wants.
Maybe true (maybe not, if they plan to split HBO Max into like 4 different services…), but it’s still only been sweet talk and pipe dreams from these guys so far. I’ve never been a bearish bull before (or is it bullish bear ), but while this thing is being dragged with the rest of the market currently, hopefully to that $10 price point, the catalysts on the ticker are what we’re really aiming at. Wait n’ see til Black Adam then ER, we’ll get a better picture after reviewing the reactions to those.
Here’s the Variety article, it’s pretty short-
And the Hollywood Reporter-
I do feel the need to mention that I’m sorry if anyone did sell October 10p here before the range broke down. I truly believed it would stay pinned in there between $12-$14ish until mid-late October or early November when something of substance emerged or surprise news came out. I did always caution risk, but still, I’d feel bad if an idea off my posts has anyone sweating a position. These catalysts are only a few weeks away and I didn’t see any reason for it to go higher or lower without news. Just very big things happening in the overall market that this wasn’t able to be immune to. It’ll be alright, we should get a pop or drop to play, and once a new range is formed we should be able to trade that consistently as well! Hope everyone’s had and has a good week, today was a potentially rough one
Still latched on the market, Zaslav had a Zoom Town Hall type meeting today though, where he seemingly put the Comcast buyout/merger news to rest, saying “We are not for sale, absolutely, not for sale.”
Not much else happening here, still wasn’t doing much of anything that wouldn’t have been better played elsewhere in the market/the megas/the major ETFs. It may be safe to assume that this remains latched onto the market til at least the Black Adam release, barring any surprise news. Will continue to follow this and keep an eye out for anything surprising.
I’ve been busier than I expected so far this week, but still basically the same story here…in a possibly more interesting area again, but as of now this is mainly puttering along with the market waiting for some news to drop, mostly some real numbers to come out showing the company is or isn’t doing what it needs to do to begin looking potentially profitable again.
Two reasons I’m making a quick post here tonight ,#1- a Wells Fargo PT change, they maintained an Equal Weight Rating but PT was lowered from $19 to $16. Currently (and pretty much since last ER) trading at $12.36, so a little bit strange they even bothered updating, but noteworthy. This’ll need an ER that cures world hunger to hit $16 this year IMO, but a lot of the analysts and bull theses on this one seem to be aiming towards 2023 anyway.
That kind of leads to #2- at this price point I am not entering any positions, but I am on the lookout for another small swing range to begin building out until next ER. That’s still tentatively scheduled for first week of November, though no solid dates yet. Nothing special towards either side with daily volume, so I think the sheer violence of last week (and now this week so far as well) was just too strong for something like this to stay bound in that range it was in, so I’m looking out for what happens as some of last week’s market-wide fear settles down and things shake out… especially once this rally loses steam. Last time it was range bound SPX/QQQ/etc had been pretty steadily going downward with some pops here and there and WBD was unfazed for the most part, just happily bouncing along it’s dollar and a half wide tunnel.
Very possible and maybe even likely that this just keeps moving with the overall market til the ER, but during the last range it pretty effectively pinged between basically one dollar (~$12.50-$13.50 with pokes at $12 and $14); I’m curious to see if something similar re-establishes, maybe a bit lower on the chart this time (say $11.50-$12.50 with taps of $11 and $13 instead, but it’s still far too early to say that, pure speculation/example)…in any case, it’d be fantastic to get those swings back on the menu, they were nice, cheap, reliable, and easy, but we’ll have to see how stuck this has become to the market at this point, it does not work well as a cheap SPY etc replacement when it’s out of range and following market, better risk/reward elsewhere on both scalps and swings when this is getting whipped up and down unpredictably…I’m very much hoping for that swingable range back, otherwise, looking towards ER.
Am watching their various media releases as well, but they don’t seem to be moving the ticker very much, feels like investors and analysts both want to actually see a full plan being put to action going forward alongside successful releases, so I am watching them moreso in case they’re received badly…I don’t think a good release will have as much positive impact as a bad release would have negative impact. Good=“Nice, keep showing us more, I’ll hold” and Bad=“Ehhh I knew it, dumping before this gets even worse”… that’s the gut feeling I have from what I’ve been reading, at least.
Kinda TL;DR, Wells Fargo moved their PT down from $19 to $16 today with a maintained Equal Weight Rating, I have no open positions as this is just currently mostly moving with the market, but I am actively watching for another, new daily/hourly swing range to establish around this price point going into their ER, scheduled for some time in early November (Have seen both Nov. 2 and Nov. 4 listed with no new updates).
If no new range develops, oh well, we wait for the ER to release and play elsewhere. Still going to try to be around TF a bit more this week if possible, hope everyone’s doing well and staying careful!
Some news, more layoffs coming through here. Today’s been pretty steadily green after the news, so seems the market is taking it as cost reduction…still no positions, a range is arguably building (intraday this time instead of more in AH/PM though), but it’s less than $1 swings, not those nice $1.50-$2 up n down almost every day we were getting… not seeing much playable moves here (maybe some theta gang stuff with the $2.50 wide strikes, but be wary of the ER in November… the date for that is still tentative from what I can tell, they’re cutting it kinda close…).
So yeah, not too much happening currently, just wanted to put this up for future reference (and also because it’s layoff related, the importance of which have been being discussed over in the Stagflation and most of the other major/macro threads, the HOPE chart and all that):
Seeing an ER date of 10/27 being scattered around, and that is now the date on TradingView’s chart, so I’m gonna keep that in mind as the date vs. first week of November.
Today was interesting here, it got pulled up big time with everything else, as it double bottomed off 11.25. It’s now (in one day’s move) bumping up against previous support right at 12.50, macro market conditions will matter more here for now but I feel we’re right on the line between popping back up into the previous channel, or it tries for $13-$13.25 and gets rejected back into just ranging down slowly between roughly $11.25-$12.45 until a catalyst, probably ER. I’m leaning towards the latter (downward trickle in a range) as I think today’s rally was more than a bit of an outlier and that reality will begin to set in over the next week, I also think this will be pulled along whichever way things go in the overall market until the ER, and although slight, this has been trickling downwards in a channel pretty cleanly for the most part, so I took one 11/18 10p today, hoping for a revisit down towards 11.50 before the end of the month. Just one 0.32 contract for now, really more of a lotto betting on next week being volatile enough to get a few bucks off it, but felt I should mention it. I may add another if we have a day or two of faltering green, but we’ll see.
Here’s the plain Daily chart to show just how ridiculous today was, all of the last range was bought up today (though I don’t think that has anything to do with WBD fundamentally and everything to do with market mechanics, I’m coming from the Stagflation and SPY Anal threads if you can’t tell ), and also to illustrate how we’re probably right on the cusp of either breaking upwards back to range where we were post-ER drop or for a peak off either a double top or slight pullback (maybe in PM?) and small bounce to a lower high then downward trickle continues. Hoping for some nice top wick heavy candles in the coming day(s) and for a trend to re-establish:
Really still very much looking out for either or any range to become playable again, but it’s probably more time to begin planning for ER and how to play that. They have that infamous $3bil in debt, PT downgrades that are way higher than current price (Morgan Stanley’s $18, then today Credit Suisse maintained an Outperform while cutting target from $39 to $36), a good deal of conflicting info…I have to read a bunch more, but with the layoffs and project cancellations the company’s been doing I’m thinking while ER will be bad or neutral, guidance may be better than expected. Maybe the cuts they’ve been making combined with low expectations could make for a big positive surprise, though that feels a quarter or two early…Also too early for me to be realistically guessing. This is honestly my first time really trying to do DD going into an ER, so please do call out anything I may get wrong or miss, but I’ll try to get an idea of their current financial situation over the next few days, right now all eyes are on what happens with the fallout from today’s CPI print in the overall markets.
This ended up holding above 12.40 which is a bit concerning for a bear case, but at the same time the daily candle today is what I was hoping to see, a red hammer… though not as large as I’d hoped, it only barely went red at the end there. Not super bearish, especially when compared to the similar but much larger red candles elsewhere in the market, but as far as a purely technical standpoint goes, it looks like it should trickle down a bit more, maybe bear flag a bit into ER. Trying to separate what I want to see happen and what I am actually seeing right now.
To that end, Bullish counterpoint, this was riding under and bouncing downward off the 8 and 21 day EMAs pretty much since last ER drop, which were both blown through yesterday and then today this closed above both. Though considering how much of an outlier yesterday was, it’ll probably take a day or two for the EMAs to settle back into a more accurate average (I think). Currently on the Daily we have the 8EMA=$12.12, the 21EMA= $12.21, and the 200EMA at $17.40.
I don’t like that SPY dipped under $360 and this stayed above not only $12 but above $12.40, slightly bearish/neutral Daily candle aside, that says to me this wants to be back in that $12.50-$13.50 area until the ER either week after next or the following. Still going with Oct. 27 as the tentative date, but also still not seeing that set in stone anywhere…I still have that 10p, will see what next week brings, whether this does fall back down towards $11.50 or it gets lifted back towards $13. There’s really cases to be made on both the bull and bear side, so best to wait and see which direction it picks next week before trying to swing non-lottos here.
But in reality, this is turning the corner to a Pre-ER planning phase, there will be better scalp opportunities elsewhere next week, hopefully swings here will be back on the menu post-ER again, irregardless of whether it’s a good or bad report. I don’t particularly mind if the ticker’s at $10 or $20, so long as it tightens back up and offers a new range to swing…
Will keep an eye on #NFLX and #DIS ERs this week for a gauge on similar business models and a couple tickers this should show some sympathy with. The numbers in those will hopefully give an idea of what this might do, we just gotta keep in mind the unique issues facing all the different companies and try to account for them. While leaning short term bearish and mid-long term (~Q3 2023) bullish, I’m a bit hesitant to play the actual report as these layoffs and department cuts may fluff up their numbers or forward guidance, from a safety standpoint I’m more interested in the aftermath and where it settles; a strangle might work going into the report if played correctly but with the strikes being $2.50 apart, it’s tougher to fine tune a BTO-type spread that doesn’t involve selling contracts.
As usual, probably some better plays here involving Lvl. 3 options, but I unfortunately am not there yet in my own account and wouldn’t really be comfortable trying to put forth a strategy I have not played myself. If any of y’all who play Verticals/Debit Spreads and the like see any potential positioning that could work out for, say, a 2%-5%+ move in either direction post it up! I’ll play around with some of the calculators etc to see if I spot anything, but a strangle is just about all I’d be able to actually play myself, so yeah, would definitely rather hear from people with live experience in that area.
In the meantime, I’ll be looking around for info on the financials and whether we should be expecting a positive or negative reaction to this upcoming report, but again, I came to this ticker after the big move down and stayed for the leisurely swings, so the post-ER range and how to play it is what’s gonna be front and center for me when thinking on this one. Hope everyone has a great weekend, next week could be a big one across the entire market!
Still not seeing very much as far as expectations go, though Earnings Whisper and RH both now list Nov. 3 as the ER date. Really kind of a bizarre lack of data available. A few analyst reports starting to come in, and a wide range of PTs (from $16-$40); here I’m just going to kind of toss up the info I’ve come across so far to consolidate it all in one place.
First, here’s Mimir/EW on this, may be subject to change still as it is not yet confirmed (can be said about pretty much all of this honestly)-
This is probably the most detailed look forward for this ER I’ve seen so far, Needham’s Q3 revisions (downward a bit, but not completely bearish by a long shot)- Needham - Lowering 3Q22 Estimates
(Don’t know why a Yahoo Finance article is linking through someone’s personal account, better archive this before it changes actually… https://archive.ph/Xwzmk , in case the above stops working)
Some key takeaways:
We lower our 3Q22 revenue, operating income and EPS estimates for WBD.
-We lower our advertising rev estimate by 10% (to down 9% y/y), to reflect WBD guidance of high single to low double-digit declines, owing to current scatter market softness.
-We lower our distribution rev estimate by 2% (to down 3% y/y) owing to linear TV sub losses.
-Greater FX headwinds than we had previously anticipated.
-Tougher comps because last year benefited from the Summer Olympics (held in 3Q21).
These negative adjustments were partially offset by:
-higher content revenue than we previously expected because WBD licensed the Lord of the Rings library movies to AMZN to coincide with its streaming release of The Rings of Power;
-higher cost synergies at WBD than we had previously expected; and,
-higher share count.
…, we now expect 3Q22 revenues of $11.3B (up 3% y/y on a PF basis, and 1% below our previous estimate), and Adj EBITDA of $2.3B (down 16% y/y on a PF basis, but 15% higher than our previous estimate). We estimate that WBD will add 3mm subs in 3Q22 for 95.1mm global subs. We expect 1 mm domestic sub adds, and 2mm international sub adds.
FY22. As a result of the comments above, we now expect FY22 revenues of $46.5B (up 3% y/y on a PF basis, and 0.2% below our previous estimate), and Adj EBITDA of $9.4B (down 12% y/y on a PF basis, but 16% higher than our previous estimate).
From the same page, this is their investment thesis and bull/bear cases:
What we like most about WBD as an investment idea includes: a) we expect discovery+ to become one of the most valuable streaming services globally, especially as it incorporates the WarnerMedia assets; b) In the US, WBD’s channel bundle has the second largest share of US TV viewing (behind NBC Universal) at about 20% of total viewing time (25% of non-sports viewing), but it garners under 10% of total subscriber fees paid out by linear TV distributors - implying upside to affiliate fees; c) including SNI’s channels, WBD’s channel bundle aggregates 25%-35% of US women viewers aged 25-54, suggesting upside to CPMs; d) about 1/3 of WBD’s revenue comes from outside the US, suggesting geographic diversification; e) because WBD owns or buys IP rights globally, its ROIs should be higher than US-only peers; and, f) cost synergies from the WarnerMedia acquisition (promised is $3B, with $1B identified so far) should continue to expand margins by slowing OpEx growth.
What we like best about WBD’s DTC strategy (ie, discovery+) is that it is focused on maximizing revs per content hour by having multiple revenue streams on linear TV plus VOD plus hybrid DTC with both advtg and subscription revenue globally. Higher ROIs on content should enable higher spending on new content, which should drive higher sub adds. A bigger bundle with HBO Max, CNN, etc should lower churn and raise LTV.
BULL CASE ASSUMPTIONS
WBD’s combination and launch of HBO Max & discovery+ delivers outsized subscriber gains and/or higher advertising revenue than expected, which causes investors to project faster rev growth and to revalue WBD upward.
OUR (*Needham) CASE ASSUMPTIONS
WBD has very strong business leadership in its CEO, David Zaslov, with John Malone as a large personal shareholder and on the Board. We expect cost synergies to be nearly $5B based on its track record.
BEAR CASE ASSUMPTIONS
Cord cutting accelerates or COVID lock-downs shut movie theaters again.
Weak advertising or economic growth.
Integration pains and/or employee turnover.
Lots of info to look through, this line caught my eye though-
b) In the US, WBD’s channel bundle has the second largest share of US TV viewing (behind NBC Universal) at about 20% of total viewing time (25% of non-sports viewing), but it garners under 10% of total subscriber fees paid out by linear TV distributors - implying upside to affiliate fees;
If they’re correct about affiliate fees seeing some upside, it puts a major dent in this Bear thesis from Morningstar as posted on RH (was trying to see if they had any updated estimates on EPS etc)-
This is where I begin to fall out of my wheelhouse a bit, reading these financials takes some time for me, it’s not (yet) second nature for me to look at a spreadsheet and see ‘bullish’ or ‘bearish’…screenshot info dump incoming-
First, two basic ones from MarketBeat (any good? I wasn’t a fan of the assault of ads I got when visiting this site, lol)
Now some more meat and potato type stuff, from the Needham analysis. Reading these reports and coming to a conclusion is kind of the point of this exercise (at this point, after ER it’ll be looking for whether or not easy swings are back on the menu. Trying to follow this one ticker through the ERs is mostly personal practice for the future, to be better able to try and help the community catch good ER plays)
It’ll take some time to parse all this, and I do wish there was more than one analysis like this this up to date. That said, overall it is beginning to feel more and more bullish, or at least more towards neutral. Half the analysts consider this a Hold, and most are betting the real progress for WBD will come in 2023, so I’m hoping for one good move on ER and then back to that range, whether it ends up being $10-$12 or $18-$20. I’m attracted to that beautiful overnighter range this was in for weeks following the massive drop last ER, not necessarily the move itself…however, depending on what % move gets priced in for this, I may be considering a same date expiry 12.5c/12.5p straddle into the ER, but only if the expected % move is on the lower end, above 10% or 15% and it’d be a little iffy I think. I wasn’t and still am not totally sure straddles/strangles would work very well with the strikes being $2.50 apart, buuut if this does have another multi dollar move and puts either the 10p or 15c ITM, that’d be huge. Gotta think more on that, will be awaiting the official expected moves eagerly.
TA-wise, this is stair stepping back up into the previous range (sucks for that 10p for now :-/); small daily candles to be sure but kinda-sorta-trying-to make higher lows. 12.55 seems to have become somewhat solid support again this week, it was the LoD both today and yesterday. Still sitting pretty above the 8 and 21 day EMAs, though rubbing the top of the Bollinger now. RSI very slightly making higher lows too, but still in the middle, not close to overbought or sold.
We’ll see how the release of Black Adam this Friday moves this, right now it’s expected to bring in $135 million at the box office over the weekend (despite some negative early reviews, as per Deadline below in the Walter Hamada article), so it will be interesting to see if there’s a noticeable effect whichever way it goes. House of the Dragon being a success week after week really didn’t move it much at all, but that could be investors waiting to see the full streaming numbers over these next reports. All in all that’s pretty much where everyone seems to be at, neutral or skeptically bullish til hard numbers start to drop.
Some recent news-
Article where I found the Needham estimates
DC Films President Walter Hamada Steps Down
(Hamada had signed a contract in 2021 through 2023, so this departure is early, and seems to be connected with David Zaslav’s obsession with finding a ‘Kevin Feige for DC’…“Hamada will be the fifth Warner Bros motion picture studio executive to leave since David Zaslav took the reins of the newly merged Warner Bros Discovery, following Warner Bros. Motion Picture Group chairman Toby Emmerich, President of Production and Development Courtenay Valenti, Motion Picture Group COO Carolyn Blackwood, and Animation Group EVP Allison Abbate.”)
Soo yeah, again, seems everyone’s in the middle with a bit of “can’t really go much lower…can it?” thrown in there. Netflix ER was surprisingly bullish for streaming, though there wasn’t much for WBD in terms of a sympathy move…still, I would cautiously think that bodes well for WBD’s streaming departments, I suppose the question is will their other departments also do better? All these department and executive cuts, seems bearish, but in reality will it be viewed as cut costs?
I still maintain that one quarter shouldn’t be enough for another huge move like the previous, post merger report; but on the other hand expectations just seem so low for this quarter (but high for 2023), and with even the revised PTs being so far above the current price it makes me wonder if even a slightly positive report has the potential to send this…
A week or two back I was thinking any negativity would drill this towards or under $10 while positivity would result in a muted response until it became apparent over the course of multiple reports that growth is consistent, now I wonder if I had that backwards, that maybe the bulk of the selling power got out in that last post-ER dump and what remains now is holders/dip buyers; and so instead a negative report would end up being a somewhat muted move down with a positive report putting up a double digit move up. Maybe it’s both, that either way, this report isn’t going to be enough to drill it or rocket it, that investors would want to see multiple quarters of reports under the new leadership and amidst so many changes before deciding to go in heavy in either direction? Hmm, should begin keeping an eye on flows right about now, y’all will probably see me asking around TF for anything out of the ordinary popping up between now and the report.
2023 should definitely be a bigger year regardless, the more I read the more I think there’s some actual long term potential here, but it’s definitely too early to say. Need more info on how things are really going under Zaslav, I really believe that this quarter’s report in particular will be extra important for the company going into the new year. I’m just very undecided on whether this particular report is going to be a big mover or not, and also whether negative numbers would move it down more than positive numbers would move it up or vice versa.
Not much TL;DR here, mostly musing on whether or not a big move is even to be expected off this ER or if we need a few more reports under the new leadership before bigger investors decide one way or the other; and if a big move is in the cards, would it happen off positive or negative news, or will Priced In strike again? A vast majority of the numbers and screenshots above are from just the one source, it would be nice to compare similar reports from others to better gauge these expectations, but I can’t find em yet. Hopefully more pre-ER analysis’ begin to come out sooner than later so comparisons can be made to get a better idea of how Wall St is feeling on this one
Some news has been dropping and an 8-K filing popped up today, looks like Nov. 3 AH is the official report date/time. To me it seems like they’re looking for as many tax/cost write-offs as possible while in the process of building out some new leadership, now looking further into 2023 and even 2024 as their target goals for a better balanced sheet.
This quarter is a bit tough honestly, on one hand it feels like the start of taking the company in a new direction is being put into motion and that the forward look/guidances should be positive (with the reaction to their last report it almost feels like a there isn’t a very high chance of things dropping much further, but on the other there’s always more room to have something turn out bearish)…seems to me a big focus will be on the restructuring and cost cutting done over the last quarter while pushing next year or the following as the “true” turnaround time.
I don’t think anyone really expects this to gain back everything it lost in just one quarter, but a lot of the language and tone seem to be looking towards the next year or two rather than needing to see things immediately around right this second. The whole slow and steady approach seems to be having a positive effect on opinions, with 50% still rating this as a Hold and now 46% rating as a Buy, mostly talking about what we might expect out of 2023-2024, not necessarily this report. Still, there are a few new numbers related to costs and the outlook going forward, laid out in an 8-K released today and summarized in a few articles.
Costs and pre-tax restructuring charges as laid out in the above-
Item 2.02. Results of Operations and Financial Condition.
As further described below, the Company (as defined below) estimates it will incur $1.3 - $1.6 billion of pre-tax restructuring charges in Q3 2022.
Item 2.05. Costs Associated with Exit or Disposal Activities
As previously announced, on April 8, 2022, Warner Bros. Discovery Inc. (the “Company”), formerly known as Discovery Inc., completed its acquisition of the WarnerMedia business of AT&T Inc. In connection with the completion of the acquisition, management has announced and has taken actions to implement projects to achieve significant cost synergies for the Company.
As part of its plan to achieve significant cost synergies, in Q3 2022, the Company finalized the framework supporting its ongoing restructuring and transformation initiatives which will include, among other things, strategic content programming assessments, organization restructuring, facility consolidation activities and other contract termination costs.
The Company estimates it will incur approximately $3.2 – $4.3 billion in pre-tax restructuring charges comprised of:
•Strategic content programming assessments, leading to content impairment and development write-offs, of approximately $2.0 – $2.5 billion;
•Organization restructuring costs, including severance, retention, relocation, and other related costs: $800 million – $1.1 billion; and
•Facility consolidation activities and other contract termination costs: $400 – $700 million.
Of the total amounts above, the estimated cash expenditures from the organization restructuring, facility consolidation activities and other contract termination costs will be in the range of approximately $1.0 – $1.5 billion.
The Company incurred $1.0 billion of pre-tax restructuring charges in Q2 2022 and estimates $1.3 – $1.6 billion of additional pre-tax restructurings charges, primarily attributable to content, in Q3 2022. While the Company’s restructuring efforts are ongoing, including the strategic analysis of content programming which could result in additional impairments above the estimate provided above, the restructuring initiatives are expected to be substantially completed by the end of 2024.
Here’s an article I found that explores some of the estimated $2 billion in write-offs this quarter:
What Warner Bros. Discovery’s army of accountants called “content impairment and development write-offs” are part of greater “pre-tax restructuring charges” recognized in its fiscal third quarter, totaling between $3.2 billion and $4.3 billion. The difference comes from other restructuring costs, like the severance packages that accompany mass layoffs, and the consolidation of offices and other facilities.That’s one way to balance the balance sheet. WBD performed what it called “strategic content programming assessments” to come up with the $2 billion-plus in write-offs of TV series and movies. And there could be more in Q4.
Warner Bros. Discovery (NASDAQ:WBD) is estimating that it will take on some $3.2B-$4.3B in pretax charges tied to restructuring its businesses.
In an SEC filing, the company says about $1.3B-$1.6B of those charges are coming in its third quarter.
That’s tied to reviews coming out of April’s merger of WarnerMedia with Discovery to create the company.
“As part of its plan to achieve significant cost synergies, in Q3 2022, the Company finalized the framework supporting its ongoing restructuring and transformation initiatives which will include, among other things, strategic content programming assessments, organization restructuring, facility consolidation activities and other contract termination costs,” the company says.
Specifically, it’s planning on $2B-$2.5B in “Strategic content programming assessments, leading to content impairment and development write-offs”; $800M-$1B in “Organization restructuring costs, including severance, retention, relocation, and other related costs”; and $400M-$700M in “Facility consolidation activities and other contract termination costs.”
Of those amounts, cash expenditures will be in the range of $1B-$1.5B, it says. About $1B in pretax restructuring charges came in Q2. The company intends to treat the charges as affecting comparability of results.
All in all, the sentiment seems the same, that while faced with some substantial debt, the outlook for 2023 onwards is somewhat, relatively high. I wonder if this’ll end up being a case of bad earnings saved by good guidance? Things are looking a bit more interesting with all this somewhat conflicting info (big debt met with write offs, those write offs consisting of personnel and department cuts, those cuts met with restructuring into a tighter content focus and bringing in some bigger names to head up projects and/or departments… it’s like a huge tug of war between past pre-merger and WBD future).
I’ll still be on the look out for new info between now and the 3rd. I am actually very glad the ER did end up being the 3rd and not the 27th, as I’ve been really tied up with a bunch of IRL stuff, I can’t really be around tomorrow (Had a dental thing get postponed yet again and so have been looking for a new office…My insurance is investigating the place, it’s been crazy), but either way I am hoping to at least be watching the markets in real time with everyone for the second half of this week and that by the beginning of next I’ll be in the right place to be actually trading again.
A little early to say, but I’m still thinking I may begin to look into picking up a strangle or straddle going into ER. This has been in a pretty solid uptrend the last two weeks, I never really got that pullback I was looking for to unload that 10p so I would be setting up a fresh position for this one, depending on what kind of option % moves begin to get priced in. If it’s a 5%-10% move that’s priced in I’d be more open to taking something like that, though at the same time this trickle upwards would have been nice to hold some calls during. I had been expecting it to keep bouncing up and down for another week or so, but oh well, market being green combined with Black Adam and HOTD both being successes has helped to keep this up there, maybe the time for strangles has passed…With this closing at $13.57 today, I’ll be keeping a serious eye on $13.75 and $14, I’m not trying to time any reversals, but I also don’t see this just making it all the way to $15 before the report so I don’t necessarily want to be buying into calls here either. I could be wrong though…Could maybe make a few bucks selling calls and puts, but that’s now more risky as well I think, I wouldn’t want to be betting on either $12.50 or $15 right now. Just gonna keep watching how things shake out til the 3rd for now.
I’ve had a lot going on lately and haven’t been in the market really at all, but this reports after the bell today and I found two articles I wanted to post up, some good pre-ER info.
-The consensus EPS Estimate is -$0.05 (-120.8% Y/Y) and the consensus Revenue Estimate is $10.33B (+227.9% Y/Y).
-The company is expecting to book a pre-tax charge of $1.3B to $1.6B in the quarter for restructuring its businesses.
-More than 50% of the company’s revenues comes from advertising and Q3 is expected to have witnessed a steady ad-spending environment
The net debt of $47.5 billion is a dark cloud. It has a net leverage—net debt divided by the last 12 months of adjusted earnings before interest, taxes, depreciation and amortization—of 5 times, much higher than other media companies.
Warner Bros. Discovery has said it aims to bring that down to 2.5 to 3 times by the end of 2024 and promised to devote free cash flow to paying down debt.
The repositioning “requires fixed income investors to hold their nose for a few years,” Moody’s Investors Service Senior Vice President Neil Begley said.
The slowdown in advertising is more bad news. CNN Chairman Chris Licht told staffers in a memo last week that the state of the economy will result in unsettling changes that “will not be easy because they will affect people, budgets, and projects.”
I was beginning to see a lot of speculation that Zaslav was simply trimming up WBD to turn around and re sell it, and the WSJ article ended with a mention of it and the ‘Absolutely not for sale’ comment. Feels like something to keep watching into 2023 and beyond, a change on that stance could be a mover on this.
And while the Hollywood gossip machine has a theory that Mr. Zaslav is stripping the company down for a sale, he said at a companywide meeting earlier this fall that Warner Bros. Discovery has the strongest hand in the business.
“We are not for sale, absolutely, not for sale,” he said.
All in all I’m really not 100% sure on this as surprises in revenue (ad or otherwise), or if the restructuring efforts haven’t paid off very much, or if really any curveballs are thrown out can all affect how this goes down, but the position I took is leaning slightly more bearish, but only slightly and more as a consequence of holding onto an extra put for a few weeks, but a ~$1 (or 10%) move that sticks into tomorrow in either direction will see some decent green on this spread before IV, so…
As I said, I’ve been mostly out for a while now, seems the monthlies got a bit of a chain extension. There are a lot more strikes available now…helped with finding a spread I liked, definitely appreciated this extension for a change.
Holding through til tomorrow, all 11/18 expiry: 3x 10p @0.16 against 2x* 14c @0.25*. Slightly tempted to drop one put now for very very small green and pick up another call to lean it bullish instead, but on the other hand I’m pretty happy with the risk reward as it stands, that would change up the plan last second (old rule I’m trying to keep improving on); flipping a put into a call now would erode my downside protection a good bit, as well as push a little bit past the max upfront capital I decided on for this ER hold (always risky, and while I’m confident this will move a dollar one way or the other, just $75 for me)… Edit- annnd having said that (and spending a few more minutes in OptionStrat), I did not drop the third put, but did add the 2nd call. Total cost for everything is ~$85, an extra $10 on the position I’ll be very happy to have spent if there’s a bullish outcome, without affecting potential further downside profits very much as the puts were already a bit green). The position is now much more balanced in both directions, now with similar/almost the same profit if it moves in either direction. One dollar
With this position I’d be hoping to see above $13.50 or below $11.50 for profit I’d be pretty happy with (though I do have a good bit of room in between for a wash, particularly when IV is high at open), a multi dollar drill or a pump would be super juicy but this would need to be a pretty huge miss or beat for that…not much else to do now but wait and see what they have to say at 4:30
Warner Bros.Discovery (NASDAQ:WBD) reported quarterly losses of $(0.95) per share. This is a 495.83 percent decrease over earnings of $0.24 per share from the same period last year. The company reported quarterly sales of $9.82 billion which missed the analyst consensus estimate of $10.36 billion by 5.18 percent. This is a 211.84 percent increase over sales of $3.15 billion the same period last year.
Sounds like a miss, though AH action doesn’t quite know what to make of it yet…looking through the report here while waiting for the call to see if there will be guidance etc: https://ir.wbd.com/investor-relations/default.aspx
From .PDF in the link, here’s the intro/summary to the sheets-
The call is mostly talking about content, content, content, and a little bit on unique cross platform advertising opportunities. Otherwise it’s mostly talking about looking forward, how WBD in 2023 and 2024 will continue to improve in all areas…not much AH action, as I’d been pondering over the past few months each time taking positions here and how there was probably better plays selling OTM options on this, feels like theta gang is gonna win out on this one…
So most everything was pretty bearish here, except on the call Zaslav announced the combined platform launch has been moved up to Spring 2023. Pretty sure that’s the only thing keeping this flat for the moment, would have been really nice to see this at $10 for a few reasons. Oh well, we’ll see what tomorrow brings, I probably won’t be seeing any huge gains but I think I can scrape out a wash at least. Is what it is, I’m honestly pretty surprised this is holding above $11.20, doesn’t feel like there are any sellers left :thonking:
); but if that market-ignorance-in-favor-of-range WBD has been pulling doesn’t pop back into place within the next few trading days then it’ll be time to bail on this call and look for a new pattern/range while prepping for ER. I probably would have cut it already if this was a more market correlated, higher risk ticker/contract, but just as the gains were muted, so is the loss, so I will give this a few days to shake out and find itself a new range, or fall out of it completely.
) seem to be the outspoken one and subject of curiosity, respectively.(Hey hey, I’ve seen this one before!)
), but while this thing is being dragged with the rest of the market currently, hopefully to that $10 price point, the catalysts on the ticker are what we’re really aiming at. Wait n’ see til Black Adam then ER, we’ll get a better picture after reviewing the reactions to those.
), and also to illustrate how we’re probably right on the cusp of either breaking upwards back to range where we were post-ER drop or for a peak off either a double top or slight pullback (maybe in PM?) and small bounce to a lower high then downward trickle continues. Hoping for some nice top wick heavy candles in the coming day(s) and for a trend to re-establish:
