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On Tuesday, Warner Brothers Discovery (NASDAQ:WBD) received an upgrade in its stock rating from Neutral to Buy by analysts at MoffettNathanson, along with an increase in the price target from $9.00 to $13.00. Currently trading at $9.77 with a market capitalization of $23.35 billion, InvestingPro analysis indicates the stock is trading below its Fair Value. The firm noted that Warner Brothers Discovery's recent financial stability and potential strategic moves could offer significant upside to the company's current equity values.
The upgrade was influenced by the company's latest round of affiliate fee renewals, which provided a level of financial stability. Additionally, growth in the Max streaming service and reduced headwinds in the Studio segment have contributed positively to the company's outlook. With an EBITDA of $7.14 billion and a debt-to-equity ratio of 1.15, analysts at MoffettNathanson indicated that these factors are expected to lead to continued debt reduction in the medium term.
MoffettNathanson highlighted that despite Warner Brothers Discovery's improved financial performance, the long-term strategic position of the company remains uncertain. However, the firm believes that the increased financial stability enhances the attractiveness of Warner Brothers Discovery's assets. Moreover, there is a growing expectation that management could be pressured to pursue transformative actions, which may result in increased mergers and acquisitions activity involving the company.
The analyst's commentary emphasized the company's progress in de-levering and the potential for Warner Brothers Discovery to engage in significant strategic initiatives. According to MoffettNathanson, these developments could lead to a considerable rise in the value of Warner Brothers Discovery's equity. InvestingPro subscribers can access detailed financial health scores and comprehensive analysis of WBD's strategic positioning, along with 8 additional ProTips that provide deeper insights into the company's potential.
Warner Brothers Discovery's stock rating upgrade and the raised price target reflect MoffettNathanson's positive outlook on the company's financial performance and strategic prospects. The firm's analysis suggests that Warner Brothers Discovery is positioned to capitalize on its current stability and may actively participate in shaping the media industry's consolidation landscape.
In other recent news, KeyBanc Capital Markets expressed optimism for Charter Communications (NASDAQ:CHTR), predicting improved Internet subscriber trends, modest growth in adjusted EBITDA, and a peak in capital intensity. On the other hand, the firm expressed caution towards Verizon Communications (NYSE:VZ), expecting lower adjusted EBITDA growth among its peers in 2025 and a decline in free cash flow due to investments. Equinix (NASDAQ:EQIX) also faced skepticism from KeyBanc, with the expectation of foreign exchange pressures impacting results in 2025.
In recent developments, Cogent Communications (NASDAQ:CCOI) reported mixed financial results for the third quarter of 2024, with total revenue of $257.2 million and an increase in EBITDA to $60.9 million. UBS initiated coverage on Cogent Communications with a Buy rating, anticipating growth from its acquisition of Sprint's wireline assets.
Guggenheim analysts reaffirmed their Buy rating on Warner Brothers Discovery shares, adjusting their model for the company to account for softer advertising trends. Despite the adjustments in subscriber growth and advertising trends, Guggenheim increased its fourth-quarter Studio segment profit outlook.
Warner Bros. Discovery announced a $1 monthly increase for its discovery+ streaming service in the U.S. and the resignation of Li Haslett Chen from its board of directors. The company also underwent a significant restructuring, dividing its operations into two new divisions: Global Linear Networks and Streaming & Studios.
Benchmark maintains a Buy rating on Warner Brothers Discovery stock, considering the valuation of the two new divisions and their potential impact on the market. The company also launched two new advertising solutions, Shop with Max and Moments, to enhance the streaming experience by integrating shoppable content.
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