Warner Brothers Discovery price target raised to $10 from $9 at UBS

Investing.com - UBS raised its price target on Warner Brothers Discovery (NASDAQ:WBD) stock to $10.00 from $9.00 on Tuesday, while maintaining a Neutral rating on the entertainment company. According to InvestingPro data, WBD has shown remarkable strength with a 55% return over the past year, though the stock currently trades below its Fair Value estimate.

The firm expects Warner Brothers Discovery’s second-quarter results to show "solid improvement" in Streaming & Studios profitability, while Networks EBITDA faces top-line pressure and higher sports rights costs. UBS forecasts $9.86 billion in revenues and $1.91 billion in EBITDA for the quarter, representing year-over-year growth of 1% and 6% respectively.

For the full year, UBS now projects $8.7 billion in EBITDA, a 4% decline compared to its previous estimate of a 6% drop. The firm revised its 2025 free cash flow estimates to $3.8 billion from $4.3 billion, citing transaction and debt tender related costs. InvestingPro subscribers can access 10+ additional exclusive tips about WBD’s financial health, which currently rates as "GOOD" according to comprehensive analysis.

UBS believes Warner Brothers Discovery’s planned split "could better highlight underlying asset value" but remains "on the sidelines given secular challenges for entertainment TV assets" and several transaction unknowns, including capital structure and financial composition at each entity.

The firm estimates that assuming approximately 5x 2026 estimated EBITDA for Global Networks, the Streaming & Studios segment is trading at around 9x EBITDA.

In other recent news, Warner Bros. Discovery announced the pricing terms for its cash tender offers, which involve purchasing outstanding notes and debentures through its subsidiaries. The company plans to settle all accepted notes by June 30, 2025, with J.P. Morgan Securities and Evercore Group managing the offers. Warner Bros. Discovery also disclosed its intention to exercise an early settlement right for these tender offers, subject to necessary consents and conditions. In a strategic move, the company has signed new employment agreements with CEO David Zaslav and CFO Gunnar Wiedenfels as part of its reorganization, which involves separating into Streaming & Studios and Global Networks divisions. Benchmark has added Warner Bros. Discovery to its Best Ideas List, maintaining a Buy rating and a $18.00 price target, highlighting the anticipated success of upcoming projects like the Superman reimagination. Additionally, Bernstein reiterated its Market Perform rating with an $11.00 price target, noting the company’s progress toward its planned division separation. These developments underscore Warner Bros. Discovery’s ongoing efforts to restructure and optimize its operations while maintaining investor interest.

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