WARNER BROS Is TAKING OUT THE GARBAGE! CEO David Zaslav DESTROYS Major Obstacles At Merged Company!

When Discovery planned its merger with Warner Media, they knew they would be cutting departments and staff that didn't fit with their strategy. Since the merger completed in April 2022, there have been non-stop cuts and reorganizations across WarnerMedia in people, projects, departments, every conceivable area. The stock has been down as they announce all the changes, charges and cuts, but many investors realize it's only a matter of time for the cuts and new focus on quality and merit to start working.

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Warner Bros. Discovery: Taking Out The Garbage
https://seekingalpha.com/article/4538622-warner-bros-discovery-taking-out-garbage

Warner Bros. Discovery: Possibly The Buy Of The Decade
https://seekingalpha.com/article/4542342-warner-bros-discovery-possibly-the-buy-of-the-decade

Warner Bros Is TAKING OUT THE GARBAGE! CEO David Zaslav DESTROYS Major Obstacles At Merged Company!

The cash flow reported indicated a need for a rapid course adjustment.
Nothing that has happened so far indicated a permanent profit change.
Instead, management is getting rid of subpar assets to focus the balance sheet on the profitable assets.
The current market price reflects the worries of merger failure because the bad news comes first.
These worries create an investment opportunity for investors who realize that the original reasons for the merger remain intact.
This idea was discussed in more depth with members of my private investing community, Oil & Gas Value Research. Learn More »
Warner Bros. Studio headquarters in Burbank, Ca, USA.
JHVEPhoto/iStock Editorial via Getty Images
(Note: This article was in the newsletter on September 1, 2022.)
Warner Bros. Discovery (NASDAQ:WBD) is now in the renovation phase. There are all kinds of things (projects, proposals, even budgets) that do not meet the requirements of new managements that have to go. Many times, the market loses sight of the end goal that was so in evidence during the acquisition process. Instead, the market focuses on the equivalent of a house that gets gutted on the way to a total remodel job because that same market worries someone will wreck the joists and collapse the house. That has shown in the recent price action of Warner Bros. Discovery.
Warner Brothers Discovery Common Stock Price History And Key Valuation Measures
Warner Brothers Discovery Common Stock Price History And Key Valuation Measures (Seeking Alpha Website September 1, 2022.)
As shown above, there was clearly some excitement about the merger prospects before the merger happened. But bad news has a habit of coming out first because management often "takes out the garbage" to get rid of things that frankly are not worth anything. For a merger of this size, a few billions in charges do not change the fundamental story one bit.
Instead, what is happening is the balance sheet is becoming focused upon the assets that are expected to realize the original projection of profitability and benefits that had the market excited in the first place. The immediate problem is the market gets worried that the story has changed or that management will make a mistake that is fatal to the success of the acquisition. It is actually too early to tell that. Nonetheless, Mr. Market often worries about how much more bad news is to come when bad news is the main topic at quarter end.
It would not be unusual for management to adjust the original strategy as economic conditions change or industry conditions change. But changes due to a moving business cycle are often different from permanent profit impairments (or benefits). Yet Mr. Market often confuses transitory with permanent. This confusion can cause individual investors to head for the exits before the benefits (and higher stock price) becomes apparent.
Further confusion exists because a lot of very good investors will state that only maybe one-third of their ideas do work out as planned. Therefore, there is a need for the rest of the time to cut losses and move on. But that accuracy depends upon the work done before the investment is made. Part of that work is exactly what accurate news will make or determine a change in the original story so that it is time to invest elsewhere. Generally stock price movements are not a real good indicator because stock prices often imagine three or four times as many crises as actually exist. That is why due diligence and your faith in it is so important. Then you as an investor will not be part of the panic crowd.
This management has been fairly detailed about "what garbage needs to be taken out".