Warner Bros. Discovery Splits: A New Netflix Rival?
The streaming space has become incredibly competitive over recent years as companies attempt to capture viewers' attention, with many streaming offerings emerging. We've got beloved Netflix NFLX, Disney with Disney+/Hulu, and Amazon AMZN with Prime Video, just for a few examples.
Recently, Warner Bros. Discovery WBD made headlines by announcing plans to separate the company into two publicly traded entities. At its simplest, WBD is breaking up its streaming services and TV networks. Concerning the advantages of the move, CEO David Zaslav said –
'By operating as two distinct and optimized companies in the future, we are empowering these iconic brands with the sharper focus and strategic flexibility they need to compete most effectively in today's evolving media landscape.'
The move comes at a critical time, with WBD shares underperforming significantly over the last year relative to the poster child for streaming stocks, Netflix. Still, shares have outperformed the S&P 500, undoubtedly a huge improvement from the previous back-and-forth price action over recent years.
Let's take a closer look at how the streamers have been performing.
Netflix Remains Stellar
Strong results have led to NFLX's surge over the past year, with the reaffirmation of FY25 guidance in its latest print going a long way in alleviating investors. Up 85% over the past year, the stock has been a massive bright spot, with its run seemingly being ignored by many favoring the AI frenzy.
The stock sports a favorable Zacks Rank #2 (Buy), with the revisions trend for its current fiscal year showing considerable bullishness. The company is forecasted to see 28% EPS growth on 14% higher sales in its current fiscal year.
Continued subscriber growth has overall been stellar for Netflix, reporting a negative subscriber growth rate just once over its last 12 quarters. The ad-supported tiers were a big surprise to consumers initially given Netflix's popularity for being ad-free, but the success of the implementation is notable.
Not only did it allow the company to tap into a greater number of consumers' wallets, but it also paved the way for Netflix to generate revenue from advertisers. The digital-ad market is massive, and Netflix planting its stake in the business is a big positive from both long-term and short-term perspectives.
A big crackdown on password sharing, though initially met with blowback among subscribers, has also unlocked many obvious benefits as the company looks to capture revenue from viewers who were potentially watching without an individual subscription.
The company's efficiency over recent years has also been a huge tailwind, with the company's margins expanding nicely. Please note that the chart below calculates values on a trailing twelve-month basis.
Overall, Netflix remains to go-to pick for investors seeking exposure to the streaming space, with continued subscriber growth, operational efficiencies, and successful business implementations all leading it to become the titan is today.
Can WBD Rival Netflix?
WBD's Streaming segment performed nicely throughout its latest period, seeing strong subscriber growth. The company finished the period with 122.3 million subscribers, up nicely from the 99.7 million mark in the same period last year.
The bulk of that subscriber growth originated from international markets, reflecting recent launches and growing penetration. It's worth noting that the company is looking to achieve 150 million global subscribers by the end of 2026, likely to be driven by an expanding content pipeline.
Below is a chart illustrating the company's sales on a quarterly basis.
Bottom Line
Warner Bros. Discovery WBD found itself in the headlines following the announcement of its business split, with the company breaking up its streaming services and traditional TV networks into separate entities.
WBD's streaming results have overall been solid over recent periods, performing at a higher level relative to its other segments. The undisputed leader of the space, Netflix NFLX, has also continued to see strong growth, with consumers regularly subscribing to offerings.
Zacks' Research Chief Names "Stock Most Likely to Double"
Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.
This top pick is a little-known satellite-based communications firm. Space is projected to become a trillion dollar industry, and this company's customer base is growing fast. Analysts have forecasted a major revenue breakout in 2025. Of course, all our elite picks aren't winners but this one could far surpass earlier Zacks' Stocks Set to Double like Hims & Hers Health, which shot up +209%.
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Netflix, Inc. (NFLX): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).
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