Shares of Warner Bros. Discovery (WBD) popped on Tuesday, hitting a 52-week high after the entertainment conglomerate said that its board of directors has launched “a review of strategic alternatives to maximize shareholder value.” The news came after weeks of deal chatter surrounding the Hollywood giant, led by CEO David Zaslav and just ahead of Netflix’s third-quarter earnings report.
Netflix’s stock hit a 52-week high of $20.58 in early trading. As of 1:15 p.m. ET, the stock was up 10.8 percent at $20.29.
Citing “unsolicited interest” from “multiple” parties, WBD said the options include continuing with the its planned split and spin, a “transaction for the entire company” and “separate transactions for its Warner Bros. and/or Discovery Global businesses.” Plus, it mentioned the option of “an alternative separation structure that would enable a merger of Warner Bros. and spin-off of Discovery Global to our shareholders.”
The company indicated that there was no timeline for the strategic review. Said Zaslav: “It’s no surprise that the significant value of our portfolio is receiving increased recognition by others in the market.”
TD Cowen analyst Doug Creutz, in a reaction note, shared: “We view the announcement from the company as a formality as news reports had already indicated that the company was already in discussions with multiple parties.”
His take on what is likely to happen on the deal front: “We continue to think a transaction with Paramount Skydance is reasonably likely,” Creutz concluded. “We are more skeptical that other, more attractive bidders will emerge.”
The analyst has a “hold” rating with a $14 stock price target on the company’s shares.
Benchmark analyst Matthew Harrigan boosted his stock price target on WBD from $18 to $25 following Tuesday’s announcement. “Even with [the] morning’s around 10 percent price advance, WBD stock has a plausible sustainable higher single-digit or better free cash flow yield post 2025,” he concluded. “The higher $25 valuation simply reflects pushing realization to 2026.”
He and his colleague Daniel Kurnos are bullish that David Ellison’s Paramount Skydance can walk away with WBD. “Although Larry Ellison may have qualms about supporting a further Paramount Skydance ‘old media’ acquisition under the mantle of his son, both Benchmark analysts following the respective companies feel this prospective combination offers the best strategic value in tandem with high likelihood for regulatory approval,” Harrigan wrote. “Apple, Amazon, and almost certainly Comcast would likely confront ‘transactional’ friction from the current Administration, while Netflix co-CEO Greg Peters has expressed disinterest.”
And Harrigan sees benefits in a deal pre-WBD’s separation. “A nearer-term bid is likely less expensive than a post-separation takeout reflecting more Warner Bros. studio and HBO Max momentum, as well as a possible tax-driven further 12-month timing lag post-separation,” he explained.
Bank of America analyst Jessica Reif Ehrlich reiterated her “buy” rating and $24 price objective on WBD on Tuesday. “Today’s acknowledgement of multiple unsolicited parties indicating interest in the company (for both the entire company and Warner Bros.) should provide a floor for the share price,” she argued. “It has been our view that post-split, standalone Warner Bros. would not be an independent entity for an extended period. Given WBD’s wealth of premium IP and robust library, we believe Warner Bros. is an attractive potential acquisition target.”
She also dove into potential deal scenarios a bit. “There are numerous considerations to a potential transaction, including regulatory concerns, financial risk, and tax implications (previously announced split is a tax-free transaction),” Reif Ehrlich highlighted. “Regulatory focus would depend on the structure of the transaction/buyer, with factors including competitive concerns related to the combination of Hollywood studios and cable networks, although secular challenges in traditional media would seem to limit this risk.”
Concluded the expert: “Along these lines, the composition of a potential bid will be a consideration for WBD shareholders. It remains unclear to us if there is now tax risk to the previously announced separation as a result of unsolicited offers that have now been confirmed by the company. Notably, press reports indicate Netflix and Comcast are prospective bidders (unclear for total company or specific assets) in addition to previously reported Paramount Skydance interest.”
Earlier this month, Guggenheim analyst Michael Morris raised his WBD stock price target by $8 and stuck to his “buy” rating. “Investor discussion remains focused on the potential for a total company bid versus the planned 2026 business separation,” he wrote.
And he concluded: “We see further consolidation as possible and anticipate investors will continue to consider asset value as a primary basis for share price targets. As such, we update our valuation approach to a sum-of-the-parts methodology, which yields a $22 12-month target versus $14 prior.”
Robert Fishman, analyst at MoffettNathanson, on Tuesday discussed possible WBD bidders. “First, as we’ve previously acknowledged, a potential Paramount Skydance bid for the whole company makes a lot of strategic sense by owning a much stronger slate of IP at Warner Bros. and seeking scale with the combined HBO Max and Paramount+ platforms,” he started off. “Combining the linear network portfolios would also likely yield significant cost synergies, while unlocking strategic benefits from pairing CBS News with CNN and leveraging the long-standing CBS-Turner partnership for NCAA’s March Madness Final Four, plus other overlapping sports rights portfolios.”
The expert called Comcast an “obvious” candidate to bid for WBD. “A Comcast bid would start with the strength and potential for cost synergies in combining the two companies’ studios and streaming platforms. There is additional opportunity to monetize Warner Bros. IP with Universal theme parks (think Batman, for example). And, of course, there are also potential cost synergies between Versant and WBD’s cable network portfolio. On paper, the fit is nearly perfect.”
Fishman’s telecom analyst colleague Craig Moffett added: “The problem is regulatory. Or, if you prefer, political. Leaving aside any legitimate concerns about further consolidation of, say, the studio business, the real issue here is that Comcast is badly disfavored by the current administration.”
Fishman also sees a possible private equity company partnership with Sony as “another path” that could be open to WBD, but he ascribed “a much lower probability” of a bid from such digital and tech giants as Netflix, Amazon, and Apple.
Fishman’s bottom line: “Ultimately, we believe Paramount Skydance remains the most likely to succeed in acquiring WBD.”
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