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Warner Bros. Discovery (WBD) stock fell more than 19% Wednesday after the company noted ongoing weakness in the ad market, saying it could impact visibility for 2024.

CFO Gunnar Wiedenfels said on the company’s post-earnings conference call that 2024 “will have its share of complexity, particularly as it relates to the possibility of continued sluggish ad trends.”

He added that “it is unlikely from today’s perspective that we will hit our target leverage range by the end of 2024 without a meaningful recovery of the TV ad market.”

WBD, like other media companies, has grappled with an unfavorable ad environment. Earlier this summer, the company said it would realign its advertising sales division, including its leadership team, amid that weak ad demand.

Network advertising revenue tumbled by 13% in Q3 from the year-earlier period, matching the drop seen in Q2.

The company’s total streaming subscribers for the third quarter came in at 95.1 million, a decrease of 700,000 global subscribers since the end of the second quarter.

The company launched a new sports tier on its Max service last month after CNN Max, a 24/7 streaming news offering, debuted as part of an open beta on Max at the end of September.

WBD CEO David Zaslav said in the earnings release that both of those offerings “are showing early signs of contributing to increased engagement and lower churn on Max.”

Streaming losses reversed despite subscriber growth missing consensus estimates. The company reported direct-to-consumer (DTC) adjusted EBITDA of $111 million in the third quarter, a $745 million year-over-year improvement.

The company posted a loss of $0.17 a share in the third quarter, wider than the loss of $0.08 a share analysts had expected but an improvement from the prior year’s loss of $0.95.

Revenue of $9.98 billion came in on par with consensus estimates compiled by Bloomberg and increased 1% excluding foreign exchange (FX) compared to Q3 2022.

Free cash flow jumped to over $2 billion, stronger than analysts expected, largely due to lower content spending from the Hollywood strikes and continued post-merger synergies.

Warner Bros. Discovery earnings pressured by Hollywood strikes, ad marketWarner Bros. Discovery earnings pressured by Hollywood strikes, ad market
Warner Bros. Discovery reported a wider-than-expected loss in the third quarter as the media giant works to pare down its debt amid various challenges, including the Hollywood strikes and an unfavorable ad environment. (Pavlo Gonchar/SOPA Images/LightRocket via Getty Images) (SOPA Images via Getty Images)

“WBD is ahead on deleveraging with 2023 free cash flow estimates likely moving higher,” Wells Fargo analyst Steve Cahall wrote in reaction to the report. “Direct-to-consumer profits follow an industry-wide theme of better costs. The focus now shifts to ’24 EBITDA and deleveraging, and whether these trends can offset omnipresent Networks pressure.”

Cahall has an Overweight rating on the stock and $20 price target.

One bright spot in the earnings report was the box office. Total revenue from the studios divisions came in at $3.2 billion, up 3% ex-FX compared to the prior year quarter and buoyed by the record-breaking success of “Barbie,” which debuted in July.

The company said “Barbie” was the highest-grossing film in Warner Bros. history, generating nearly $1.5 billion in global box office.

TV revenue, however, “declined significantly primarily due to certain large licensing deals in the prior year and the impact of the WGA and SAG-AFTRA strikes,” the company said.

Network content revenue fell a whopping 22% year over year to $215 million. That dragged overall network revenue down 7% to $4.87 billion in the quarter.

The company reiterated its expectation from September of full-year adjusted EBITDA in a range of $10.5 billion to $11 billion, down from the prior low-end range of $11 billion to $11.5 billion.

Alexandra Canal is a Senior Reporter at Yahoo Finance. Follow her on Twitter @allie_canal, LinkedIn, and email her at alexandra.canal@yahoofinance.com.

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