Insights

Why Warner Brothers Discovery Stock Flopped on Friday

What happened

The current and, at least, near-term future of the entertainment industry is streaming video. So when one company heavily involved in this activity takes a tumble, others often follow. That was the case on Friday, when Warner Brothers Discovery (NASDAQ: WBD) stock was hit with a nearly 4% sell-off following the disappointing quarterly results of a peer. 

So what

That peer is Roku (NASDAQ: ROKU), which got slammed by investors after reporting its second-quarter results in after-market hours on Thursday. The company attributed its worse-than-expected performance to supply chain difficulties and a weakened macroeconomic environment.

Roku isn’t known so much for its own streaming service; rather it’s a platform used in many TVs to access such offerings.

Because of that, its performance matters for streamers, since more than a few investors use it as a gauge of the sector’s health. Hence the bad day numerous streaming stocks had on Friday — Warner Brothers Discovery was in good company, with both Netflix (NASDAQ: NFLX) and Paramount Global declining in price.

Now what

That dampened what might just turn out to be a fine weekend for Warner Brothers Discovery at the box office. The company is releasing nationwide its latest superhero movie offering, the kid-targeted animated feature DC League of Super Pets. Movie audiences can’t seem to get enough of actor Dwayne Johnson and popular superheroes, and both are spotlighted in the film.

Nevertheless, Roku’s underwhelming performance — coming so soon after the subscriber losses reported by Netflix in both its first- and second-quarter results — isn’t going to help the general investor sentiment on streamers. Warner Brothers Discovery and its peers are going to have to produce some real entertainment magic to bring the bulls back to their stocks.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Netflix and Roku. The Motley Fool recommends Warner Bros. Discovery, Inc. The Motley Fool has a disclosure policy.

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