Warner Bros' shares are currently trading at around $15.43 a share. The media giant is due to report earnings on Thursday, will the price edge higher?

Overview 

Warner Bros Entertainment Inc., a division of Warner Brothers Discovery, is an American film and entertainment company with its headquarters in the Warner Bros Studios complex in Burbank, California. One of the "Big Five" major American film studios, and a member of the Motion Picture Association, Harry, Albert, Sam, and Jack Warner founded the business in 1923. The company quickly established itself as a leader in the American film industry before branching out into animation, television, and video games (MPA).

Financials 

Taking a look at the company’s annual earnings for the year 2021 versus 2020. Total revenue was reported at $12.19bn and gross profit was reported at $7.57bn. Both rose year-on-year. Although, net income fell by $200m for the year due to a rise of $1.25bn in operating expenses, and a lower income from continuous operations. EBITDA grew by $100m. Due to the above, earnings per share declined 14.8% to $1.55 from $1.82 in 2020. Over to the balance sheet, cash on hand sits strongly at almost $4bn with total assets at $34.4bn. Total liabilities were actually reduced by $0.8bn, which led to a $1bn YoY increase to $13bn in shareholder equity. This was because the company reduced its long-term debt. 

Technicals 

From a technical outlook, its share price currently sits around $15.43 a share. The stock has broken out of the bearish trendline (red) on the daily interval, and the push higher could be suggesting a shift in sentiment. Therefore, resistance levels now sit at $15.62 then at $16.04. A break above $16.04 could see the price climb as high as $17.64, which is where the next key resistance level sits. Support sits below at $15.05 (corresponds with the green trendline) then a major level at $14.01. A break below $14.01 may see a further retracement of the recent bullish trend, although the bias would remain positive until there was a break below $11.91. Taking a look at the indicators, MACD has turned negative but that was due to the brief retracement earlier in the month. Whereas RSI is positive as it reads 64. 

Summary 

Based on the financials, the numbers are quite mixed. Revenue and gross continue to grow, but higher expenses are hurting the net profit. A strategy for this year to help reduce, or at least find a balance within their expenses, would be to focus on areas that are most profitable. Their streaming business is key and the new merger should aid in further development and create an appetite to become more competitive. Because if we look at the balance sheet, the numbers are more positive. A strong cash-on-hand balance with gradual growth in equity is what the majority of businesses seek. So, there is potential for Warner Bros to regain some of last year’s losses. Based on the technicals, indicators are mixed but as mentioned above, the breakout of the bearish into the bullish trend offers an opportunity for investors in 2023. WB is reporting earnings on Thursday, it is expected to report an EPS of $-0.2871 on revenue of $11.23bn. A stronger than expected report may see the share price climb higher.