Is this U.S.-China selloff a buy? A top Wall Street voice weighs in
Investing.com - TD Cowen downgraded Warner Brothers Discovery (NASDAQ:WBD) from Buy to Hold on Tuesday, maintaining a price target of $14.00 as the stock has surged beyond this target following recent acquisition rumors. The stock has seen remarkable gains, with InvestingPro data showing a 127% return over the past year and is currently trading near its 52-week high of $19.59.
The downgrade comes after Warner Brothers Discovery shares climbed significantly following unsubstantiated reports that Paramount Skydance may be considering a bid for the company. TD Cowen cited concerns about the risk-reward profile, noting the potential for shares to quickly return to the $11-$12 range if no acquisition materializes. InvestingPro analysis indicates the stock is currently trading at a P/E ratio of 60.8, with analyst price targets ranging from $10 to $24.
While TD Cowen acknowledges that Paramount Skydance could potentially make a bid exceeding $20 per share, the firm believes the rationale for such an acquisition would be "at least as much political as business-related," making standard analytical frameworks less applicable than usual.
The research firm assesses that if reports are accurate, the probability of a bid occurring appears reasonably high, with high likelihood of both acceptance and regulatory approval, though numerous hurdles would remain. TD Cowen emphasized that the reported potential deal lacks concrete details or confirmation from any involved parties.
The analyst firm explained its rating change by stating that sometimes "the best move is to admit you don’t have a particular edge on a situation and move to the sidelines," which is the approach they are taking with Warner Brothers Discovery.
In other recent news, Warner Bros. Discovery has been at the center of major developments. Reports indicate that Paramount Skydance is preparing a predominantly cash bid for Warner Bros. Discovery, with confirmation from CNBC that bankers have been hired for this purpose. This potential acquisition is supported by David Ellison, the founder of Oracle. In light of these reports, Benchmark has reiterated its Buy rating for Warner Bros. Discovery, maintaining an $18.00 price target and labeling it a "Best Idea" within their coverage. Meanwhile, Bernstein SocGen Group has reiterated a Market Perform rating with a $13.00 price target, viewing the company as a key player for long-term growth in the media sector. Additionally, Wells Fargo has raised its price target for Warner Bros. Discovery from $13.00 to $14.00, maintaining an Equal Weight rating and highlighting the company’s potential as an attractive merger and acquisition candidate. These developments come amidst a broader industry trend where Nielsen ratings show a significant decline in broadcast primetime viewership, with a 54% drop in the third quarter of 2025.
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