Warner Bros. Discovery stock declines on Q1 earnings miss

Yahoo Finance’s Allie Canal joins the Live show to discuss key takeaways from Warner Bros. Discovery’s Q1 earnings call and to break down the decline in stock for the mass media and entertainment conglomerate

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BRAD SMITH: Warner Brothers Discovery reporting a big quarterly loss as the company prepares for the launch of its new Max offering in May. And this is going to be in a competitive market for streaming, we should add. Yahoo Finance's Allie Canal joins us now fresh off the call. Allie, what'd you hear?

ALEXANDRA CANAL: Yes, well, if we take a look at the share price right now, they're losing a bit of steam as investors digest that earning miss, that wider than expected loss that you just talked about, as well as those comments on the call, which just wrapped. Now, those stock declines, they largely seem to be tied with that earnings miss, that overall loss of 1.07 billion in the quarter.

But on the call, management was pretty positive, especially when it came to the future of streaming. That was a big highlight on this call earlier this morning. They said they are significantly outpacing their profitability guidance for streaming, especially ahead of that Max launch on May 23, which management said should continue to drive growth.

Now, along with streaming, the company said it's going to be very focused on making prudent financial decisions, making sure they are monetizing their content to the fullest extent. CEO David Zaslav, he emphasized it's all about quality over quantity for both their streaming content along with their film franchises. They wanted to continue to improve free cash flow, which continues to be a pretty serious headwind this quarter, negative 930 million for the quarter.

One way to do that, though, is to make sure that your financial decisions are sound, that you're not overspending. So that is a big goal. And then if we took a look at the advertising market, this has been a major headwind for a lot of these legacy media companies. The phrase being thrown around is "cautiously optimistic." Here's a bit more of what CEO David Zaslav had to say when it comes to the future of the ad market.

DAVID ZASLAV: While our results for Q1 continue to reflect the current soft ad market, we are optimistic for a gradual improvement and an eventual upturn in the second half of the year.

ALEXANDRA CANAL: Now, the upfronts are right around the corner, which should provide a bit more clarity on the state of the ad market. Zaslav saying there's a lot of opportunity for Max. There's a lot of opportunity with CNN. With the political cycle right around the corner, they said for the upfronts, they're going to be heavily targeting potential advertisers for town halls, various primaries. Also the fact that they have sports and their ad-supported offerings for streaming, those are big focuses of the market right now.

But as we've seen over and over again with a lot of these companies-- Paramount just reporting yesterday-- the ad market, it's not doing well. You know, it fell 14% in the quarter, excluding foreign exchange for their network advertising revenue. So we'll see if there's any improvements, especially with the upfronts coming up very shortly. But that is a major headwind.

JULIE HYMAN: I mean, so overall, if you had to grade the call, I guess, it seems like it's not a great idea-- it's not a great effect on the stock, to your point.

ALEXANDRA CANAL: Not a great effect on the stock. But I'm going to buck what investors are thinking right now because it seems like in general, there are more upsides moving forward than challenges. They have seemed to have reached a point where they battled a lot of those restructuring headwinds. So I'm going to go a bit controversial here with my vibe check and call it overall good.

And I have read some quick analyst commentary who say that, overall, the fact that they have improved their streaming division so much, the fact that they have been coming through with these cost-cutting initiatives, that is a positive moving forward. So I think given the fact that we seem to be having more momentum in front of us, that is what's driving my good vibe check call. A bit controversial, though, with the share price right now. But we'll see.

BRAD SMITH: Hey, you know what? You woke up today. You chose violence. You did that. That's OK.

ALEXANDRA CANAL: It's a Friday too. I mean, I'm already in a good mood.

BRAD SMITH: Well, we're going to continue to track shares. They're off of their session lows. So that is a good thing.

ALEXANDRA CANAL: Yes, they're recovering after that call a little bit.

BRAD SMITH: Absolutely. All right, perhaps the vibe is improving more broadly as well. Yahoo Finance's own Allie Canal joining us here this morning with all things WBD.