Entertainment services provider Netflix (NFLX) recently reported first-quarter earnings of $3.53 per share, beating the consensus estimate by 22.1% and its own guidance by 23.4%. However, EPS declined 5.9% year-over-year.
The streaming giant lost 200,000 paid subscribers in the quarter, missing its guidance of 2.5 million subscriber growth. Growing competition, account sharing, high inflation, and its exit from Russia led to the huge subscriber loss. The company expects these factors to lead to a two million subscriber loss in the second quarter.
Since NFLX’s subscriber loss could have a ripple effect on Warner Bros. Discovery (WBD) and Paramount (PARA), which significantly depend on streaming services, it might be wise to avoid these stocks.
Warner Bros. Discovery, Inc. (WBD)
WBD is a media company that provides content across various distribution platforms in approximately 50 languages worldwide. It also produces, develops, and distributes feature films, television, gaming, and other content in various physical and digital formats through basic networks, direct-to-consumer or theatrical, TV content, and games licensing.
WBD’s operating income decreased 10.9% year-over-year to $353 million for the fiscal first quarter ended March 31, 2022. Its total assets came in at $33.80 million for the period ended March 31, 2022, compared to $34.43 million for the period ended December 31, 2021.
Analysts expect WBD’s EPS to decrease 73% year-over-year to $0.47 in fiscal 2022. The stock has lost 31.2% over the past month to close yesterday’s trading session at $18.83.
WBD’s poor prospects are apparent in its POWR Ratings. The company has an overall C rating, which translates to Neutral in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock has an F grade for Sentiment. Click here to see the additional POWR ratings for WBD (Growth, Value, Momentum, Stability, and Quality). It is ranked #3 out of 21 stocks in the F-rated Entertainment - Media Producers industry.
Paramount Global (PARA)
PARA operates as a media and entertainment company worldwide. The company distributes a schedule of news and public affairs broadcasts and sports and entertainment programming. It also produces or distributes talk shows, court shows, game shows, and news magazines.
PARA’s adjusted OIBDA declined 53% year-over-year to $557 million, while its adjusted net earnings came in at $181 million, representing a 71.9% year-over-year decrease. Also, its adjusted EPS came in at $0.26, down 75% year-over-year.
For the quarter ending June 30, 2022, analysts expect PARA’s EPS to decrease 38.1% year-over-year to $0.60. Over the past month, the stock has lost 24.8% to close yesterday’s trading session at $28.93.
PARA’s POWR Ratings are consistent with this bleak outlook. The stock has an overall C rating, which equates to Neutral in our proprietary rating system. It has an F grade for Sentiment and a D grade for Growth and Stability.
Click here to see PARA’s ratings for Momentum and Quality as well. It is ranked #8 in the same industry.
WBD shares were trading at $18.17 per share on Thursday afternoon, down $0.66 (-3.51%). Year-to-date, WBD has declined -28.75%, versus a -9.68% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.
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