Warner Bros. Discovery, Inc. (WBD): A Bull Case Theory

We came across a bullish thesis on Warner Bros. Discovery, Inc. (WBD) on High Growth Investing’s Substack. In this article, we will summarize the bulls’ thesis on WBD. Warner Bros. Discovery, Inc. (WBD)'s share was trading at $10 as of 2^nd June.

Three years after the WarnerMedia-Discovery merger, Warner Bros. Discovery (WBD) remains caught between hope and uncertainty, reflected in its mixed first-quarter 2025 results. While total revenue declined 10% year-over-year to $8.98 billion due to weak performance in the Studios and Global Linear Networks segments, the streaming business showed encouraging growth, with an 8% increase in revenue driven by international expansion and 5.3 million new subscribers.

Despite improving adjusted EBITDA and positive operating cash flow, WBD still posted a net loss of $453 million, weighed down by substantial non-cash expenses and higher content spending. The company made progress in debt reduction but remains highly leveraged with $38 billion in gross debt and a net leverage ratio of 3.8 times adjusted EBITDA, limiting aggressive investments or share buybacks.

The legacy linear TV business, although shrinking, continues to generate strong profits, while the Studios segment faces cyclical challenges but has promising upcoming releases like "Superman" that could rejuvenate growth. Streaming, especially through Max (soon to be rebranded back to HBO Max), is the company's key growth driver, leveraging strong intellectual property such as the DC Universe and Harry Potter franchises.

Despite WBD’s attractive valuation multiples compared to Netflix and Disney, the market discounts it due to its debt burden, shrinking legacy segments, and uncertain strategic direction. Optimism exists around potential spin-offs and operational improvements that could unlock value, but investors must remain patient as profitability and sustainable turnaround are still developing.

Previously, we have covered WBD in February 2025 wherein we summarized a bullish thesis by Kostadin Ristovski, ACCA on Substack. The author argued that despite its heavy debt load and legacy linear TV challenges, the company’s vast content library and strategic shift toward streaming offered significant long-term value. Analysts believed that divesting the linear TV segment and focusing on streaming, along with debt reduction and successful monetization of its intellectual property, could drive a substantial stock rerating from its then undervalued price. However, the thesis acknowledged risks such as content underperformance and refinancing difficulties that could negatively impact the stock.

Warner Bros. Discovery, Inc. (WBD) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 60 hedge fund portfolios held WBD at the end of the first quarter which was 64 in the previous quarter. While we acknowledge the potential of WBD as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an extremely cheap AI stock that is also a major beneficiary of Trump tariffs and onshoring, see our free report on the best short-term AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.