The market hasn't been kind to Warner Bros. Discovery (WBD -0.70%) since it was spun off from AT&T (T -1.19%) and merged with Discovery in April.

Despite having a leading streaming service in HBO Max, access to some of WarnerMedia's top franchises, such as Harry Potter, and some top broadcast channels, it is also riddled with debt, owns the flagging CNN network, and has been unable to consistently capitalize on what ought to be some powerhouse brands from its DC Comics portfolio.

As a result, Warner Bros. Discovery stock has lost 45% of its value since the spinoff -- and that's just one reason investors ought to consider buying shares today. Let's look at some of the other reasons.

Family looking at laptop.

Image source: Getty Images.

Going small to grow bigger

The entertainment and media giant is on a mission to repair itself and its image. Having attempted to do too much all at once under AT&T's ownership, the new management team headed by CEO David Zaslov is in a take-no-prisoners mode to rein in extravagance and failure.

Zaslov and his management team have already taken seemingly drastic measures to contain costs and right the listing ship:

  • The CNN+ streaming service was terminated mere weeks after its launch because it had virtually no audience.
  • He told the CNN news staff they were to return to a down-the-middle reporting style.
  • He exited development and production in several regional European markets.
  • He killed off the all-but-completed DC superhero film Batgirl, realizing it would be cheaper to eat the $90 million already dumped into the project than spending even more marketing it.

He and the team also announced that beginning in 2023 the streaming services HBO Max and Discovery+ will merge into a single service, a recognition that at this stage of the streaming industry, less may be better than more. the company also just announced layoffs at HBO Max in the reality, casting, and acquisitions departments.

The moves highlight a cost consciousness that did not seem to exist under AT&T, and investors should take heart. But that doesn't mean it won't be difficult going, at least at first.

Forming a more perfect union

Bringing HBOMax and Discovery+ together could be a challenge because of the different content each offers -- the former offers a lot of top-notch TV drama; the latter, scripted reality TV. But Zaslov has said it will relentlessly pursue quality over quantity. 

Netflix (NFLX 0.70%) recently came to the same conclusion that just having content for content's sake is a losing proposition. It's likely at least partially responsible for Netflix having lost nearly 1 million subscribers last quarter, though it is course-correcting now, dropping shows for niche audiences and looking more toward content with a broad-based appeal.

Walt Disney (DIS -0.06%), of course, added 14.4 million and leapt ahead to become the leading streamer, though it has had hit-or-miss success with programming too.

Zaslov seems to realize this too and told analysts earlier this month, "Owning the content that really resonates with people is much more important than just having lots of content." 

HBOMax is a premiere streaming service and one of the fastest growing. It ranks as the second must-have streaming service behind Netflix and is the leader in perceived value. Together with Discovery+, Warner Bros. Discovery has over 92 million subscribers across its streaming services.

Trimming the fat

Warner Bros.' debt burden should also decrease significantly over time. AT&T is paying Warner Bros. Discovery $1.2 billion this month as part of the separation agreement, and by the end of the month it will have paid down $6 billion worth of its debt since the April transaction.

It will still have around $50 billion worth to deal with, but with a management team committed to responsibly cutting costs and having all parts move in the same direction bodes well for the company.

Trading at less than 10 times next year's earnings Warner Bros. Discovery produces, the stock is offering the market a discount. By comparison, Disney shares go for 22 times forward earnings while Netflix is still trading at a multiple of 23.

Warner Bros. Discovery is not likely to be an immediate turnaround success, but buying today should produce market-beating returns years down the road.