Hollywood has another problem to address. Writers voted on May 2, 2023, to strike. This is the first labor stoppage in the entertainment industry since 2007.
Writers negotiated unsuccessfully with Netflix (NFLX), Amazon (AMZN), Warner Bros. Discovery (WBD), Apple (AAPL), Comcast (CMCSA), Sony, and Paramount+ (PARA). They are fighting the devaluation of the profession of writing.
Other than the post-earnings positive reaction for WBD stock, the above-mentioned shares risk further suffering. Investors should take the opportunity for the work stoppage to start a position at a steeper discount. Those companies spent heavily to build their content library. Streaming subscribers initially played very little to watch.
Firms like Disney subsequently hiked prices to narrow losses. However, the intensifying competition will increase losses and debt levels.
Paramount lost 28% of its value last week when it slashed its dividend, alienating income investors. It earned 9 cents a share (non-GAAP).
The firm may need to rethink its compensation package. CEO Bob Bakish saw the total compensation rise to $32 million, up from $20 million the year before.
Warner Bros. Discovery reported a 44-cent loss (GAAP EPS). It took a $1.81 billion pre-tax amortization write-off from acquisition-related intangible assets. The 5.0x leverage increases risks for shareholders. Consider avoiding WBD stock.
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