Warner Bros. Discovery (WBD) missed fourth-quarter estimates on both the top and bottom line, the stock dropping Friday morning after posting this wider-than-expected loss. LightShed Partners Partner and Media and Technology Analyst Rich Greenfield joins Yahoo Finance to discuss the media studio's strategy around cost-cutting and streaming content.

"There's no doubt that [CEO] David Zaslav and Gunnar Wiedenfels, their CFO... they've done a great job of living up to the free-cash flow numbers that they promised Wall Street," Greenfield explains. "The challenge is they haven't been able to grow the business... What you're seeing from investors is that It's hard to pay meaningfully for a company if they do not believe that there is future revenue and earnings growth. So, you can cut and certainly generate cash on the short-term, but cust-cutting is not a long-term strategy..."

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Luke Carberry Mogan.

Video Transcript

SEANA SMITH: All right. Well, Warner Brothers Discovery shares are falling after missing expectations on both the top and bottom line in the fourth quarter. Now the media company seeing its studios network and advertising revenue fall as the effects of the Hollywood strikes lingered into the end of the year. Let's talk about it with Rich Greenfield, he's lightshed partners media and technology analyst.

Rich, it's great to see you here. So let's talk about these results and what it means for the broader streaming landscape. The thing that stuck out to me was the fact that they are making some progress when it comes to the streaming business and what they are seeing there, specifically what they're seeing from Max. I guess, put that in perspective for us just in terms of how much more optimistic.

Are you more optimistic about what the rest of the year will potentially look like as a result of that?

RICH GREENFIELD: Look, I think investors are panicking right now. It's when you see the stock down 10% or so premarket. I think the fear is that the company was unwilling to give any form of guidance. They've been pretty vocal in the past talking about 2024 even going back to when they closed this transaction.

And while numbers have certainly stepped down over the course of the last several years numerous times, they've always been pretty forthcoming with what the year ahead looks like. And this was the first time that they basically said that they just can't do that. And I think the fear that is sitting with investors right now is the concern that numbers are coming down.

And that the inability to guide is another way of saying, we're going to be lower than we previously anticipated. So they're doing a great job of cost cutting. There's no doubt that David Zaslav and Gunnar Weidenfeld, their CFO, they've done a great job of living up to the free cash flow numbers that they promised Wall Street.

The challenge is they haven't been able to grow the business. And I think what you're really seeing from investors is, it's hard to pay meaningfully for a company if they do not believe that there is future revenue and earnings growth. And so you can cut and certainly generate cash in the short term but cost cutting is not a long term strategy.

And I think that's the reaction you're seeing in the stock today.

SEANA SMITH: So then what needs to change because, yes, you said free cash flow was one of the highlights in this quarter, a 3.3 billion above what the Street was looking for. Some speculating whether or not that trend can continue while they are paying down debt. But I guess what else do you think is necessary in order to win the confidence of investors, which clearly many don't have right now?

RICH GREENFIELD: Look, we think they have to shut down the Max strategy. I think we've been pretty vocal, very vocal that Max is a flawed strategy. You already see them starting to license a large part of their content out to Netflix, you look at things like Ballers on Netflix now. And all of the 6 feet under those key titles now are showing up on Netflix.

I think we're at the point now where HBO is an incredible business. It is one of a kind global iconic brand. That said, I think the idea of trying to build something far bigger just isn't working. And I think just was-- if there a way to do it, I'm sure I think given where the legacy business is at Warner Brothers Discovery are meaning the challenges facing linear TV, whether we're talking Discovery Channel, whether we're talking TBS and TNT.

Those businesses are facing tremendous industry disruption headwinds. And I think, given those headwinds, you have to take a different strategy in streaming. And I think essentially scaling back becoming more of just HBO really focusing specifically on the US abandoning global desires and really focusing on being an arms dealer of content to third parties and stopping this trying to be a broader streaming service.

I think it's inevitable. I don't think management is there yet in terms of like what they want to do. But I think over the course of 2024, we think they're going to get there and you'll see a tremendous shift in strategy.