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Bear of the Day: Discovery (DISCA)

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With the market up near all-time highs, finding a “bearish” story can be tough. I mean, the proof is in the pudding right? What I am finding, and a lot of us at Zacks are too, is folks are misinterpreting our Bull and Bear of the Day articles. These are not meant to be predictions of what is likely to come over the next day, week, month or year. Rather, they are merely meant to point out bullish or bearish trends in earnings estimates coming from analysts all over Wall Street. They are to shed light rather than to force a conviction.

Today’s Bear of the Day is Discovery (DISCA). I have to admit, I personally have Discovery+ and enjoy streaming the shows weekly. Yes, that’s right, I am a “90-Day Fiance” fanatic. (I may or may not have ran into Darcey and Stacey at Drunken Dragon in Miami last week.)

For the un-initiated, Discovery, Inc., a media company, provides content across various distribution platforms in approximately 50 languages worldwide. It operates in two segments, U.S. Networks and International Networks. The company owns and operates various television networks under the Discovery Channel, HGTV, Food Network, TLC, Animal Planet, Investigation Discovery, Travel Channel, Science, MotorTrend, Discovery en Español, Discovery Familia, Eurosport, TVN, Discovery Kids, Discovery Family, American Heroes Channel, Destination America, Discovery Life, DIY Network, Cooking Channel, Great American Country, ID, the Oprah Winfrey Network, Eurosport, DMAX, and Discovery Home & Health brands, as well as other regional television networks.

The stock had a huge run thanks to a notorious hedge fund loading the boat. Since the fund blew up, the stock has come under considerable pressure, prior to its now famous merger with Warner Media. The earnings estimates, on the other hand, tell a much more bearish story. Currently, the stock is a Zacks Rank #5 (Strong Sell). The reason for the unfavorable rank is that five analysts have cut their earnings estimates for the current year while six have followed suit for next year. The impact to the Zacks Consensus Estimate is pretty dramatic. The current year consensus has been cut from $2.88 to $2.11 while next year’s number is off from $3.36 to $2.72.

The Broadcast Radio and Television industry ranks in the Top 48% of our Zacks Industry Rank. While Discovery is currently a Zacks Rank #5 (Strong Sell), there are other stocks within the same industry which have a much more favorable rank. Those stocks include Zacks Rank #1 (Strong Buy) E.W. Scripts (SSP) and Townsquare Media (TSQ).

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