By Samrhitha A and Chavi Mehta
(Reuters) -Warner Bros Discovery (NASDAQ:WBD)'s shares fell on Friday as Wall Street sees more pain for the media giant that posted more than $2 billion in fourth-quarter losses and cut annual profit forecast as ad market weakness persists.
The uncertainty of an ad market recovery in the current market condition, with a potential recession looming, is hounding large media and tech firms such as Paramount Global and Google-parent Alphabet (NASDAQ:GOOGL) Inc alike.
"The biggest unknown continues to be in the ad sales environment," Gunnar Wiedenfels, chief financial officer of Warner Bros Discovery said.
Advertising revenue at the company's networks business, which includes HGTV, Discovery Channel and TLC, is not "looking much better in Q1 2023", executives said after fourth-quarter revenue in the unit fell 14%.
"Given secular and cyclical pressures on advertising and distribution revenues, it isn't clear to us the company is out of the woods yet," MoffettNathanson analysts said.
WBD cut its forecast for 2023 adjusted core earnings, or EBITDA, and now expects it to grow in low- to mid-twenties percentage. This implies a range of $11 billion to $11.5 billion, below its previous target of $12 billion.
But the market is focusing on profitability rather than the future industry growth trend, given the current economic conditions, CrispIdea analyst Subhendu Behera said.
Shares of WBD were down 2% at $15.40.
Wolfe Research analyst Peter Supino said the company's net debt was still very high and raised concerns about its high-pay TV exposure, at a time people are moving to streaming.
"WBD might be set up to take a breather," Supino said, noting the stock's 66% rise so far this year.
The company reported a wider-than-expected loss of 86 cents per share in the quarter due to restructuring charges related to its merger joining Discovery Inc and AT&T (NYSE:T) spin-off Warner Media.