What happened

Shares of Warner Bros. Discovery (WBD -0.94%) were moving higher today in sympathy with a strong earnings report from Disney (DIS -1.82%) and a slew of insider buying in the stock, raising confidence in the recently formed company. 

As of 10:57 a.m. ET, the stock was up 6%.

So what

Disney shares are were flying higher today after the company turned in better-than-expected results in its fiscal third-quarter earnings report with strong growth in its streaming business. Disney+ added 14.4 million subscribers in the quarter, including 8.3 million from Disney+ Hotstar, its low-priced service focused on India.

There are also signs that the industry is rationalizing and focusing on monetization rather than overspending on content and competing for customers. Both Netflix and Disney are adding ad-based tiers in the coming months, and Disney+ is targeting profitability by fiscal 2024. Netflix, meanwhile, is slashing costs to drive profitability as its subscriber growth stalls.

Separately, there have been several insider stock purchases in Warner Bros. Discovery this week. In a filing today, the company revealed that Gerhard Zeiler, president of the company's international division, had purchased 20,000 shares, and earlier in the week, board member Fazal Merchant bought 35,000 shares. CFO Gunnar Wiedenfels bought 35,000 shares as well.

Insider buying is a strong sign that those who know the company best believe the stock will go up.

Now what

Warner Bros. Discovery already reported its second-quarter earnings with pro forma revenue down 1% to $9.8 billion and pro forma adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) down 31% to $1.7 billion.

The entertainment company has a trove of valuable assets including the Warner Bros. movie studio; the HBO Max and Discovery+ streaming services; and cable networks like CNN, TNT, HGTV, Food Network, and TBS.

Historically, those have been very profitable businesses, and the company should be able to do the same in the streaming era if it can execute effectively. Trading at just five times run-rate adjusted EBITDA based on the recent results, there's a lot of upside to the stock if it can deliver on its potential.