Warner Brothers Discovery stock upgraded to Buy at Rothschild Redburn on potential sale

Investing.com - Warner Brothers Discovery (NASDAQ:WBD) stock was upgraded from Neutral to Buy by Rothschild Redburn, which raised its price target to $28.00 from its previous level. The stock currently trades at $21.34, just below its 52-week high of $21.74, after surging an impressive 174.65% over the past year.

The upgrade comes as Rothschild Redburn believes Warner Brothers Discovery is up for sale, with the firm analyzing potential suitors, synergies, and regulatory considerations to determine a reasonable take-out price. With a market capitalization of $52.83 billion and a current P/E ratio of 68.64, WBD presents an interesting acquisition target.

The investment firm estimates cost synergies of $2 billion if Paramount acquires all of WBD, and approximately $1.3 billion for suitors looking to acquire just the Warner Bros unit.

Revenue synergies would primarily come from reduced subscriber churn for both the acquirer and WBD, along with higher pricing potential for a broader combined streaming service, though this would be partially offset by lower monetization when merging separate services.

Disney appears to have the greatest revenue synergy opportunity at $7 billion, followed by Paramount ($5 billion), Comcast ($4 billion), Netflix ($3 billion), and Apple ($1 billion), while Amazon would see limited revenue synergies according to the analysis.

In other recent news, Warner Bros. Discovery has been the focus of several analyst updates and potential strategic moves. Benchmark increased its price target for the company to $25.00, maintaining a Buy rating, following the board’s initiation of a strategic review aimed at optimizing long-term shareholder value. Guggenheim also raised its price target to $22.00, citing strong content performance, though it adjusted its fourth-quarter outlook due to a lighter content slate. CFRA increased its price target to $21.00, maintaining a Hold rating, based on forward earnings estimates. Meanwhile, Bernstein raised its price target to $16.00, highlighting Warner Bros. Discovery’s critical role as a content provider.

Additionally, there are reports of potential acquisition talks involving Skydance Media’s David Ellison, who is discussing a $60 billion bid for Warner Bros. Discovery with private equity firms. Apollo Global Management is reportedly considering joining this bid, given its existing stakes in media entities. These developments reflect significant strategic interest and analyst confidence in Warner Bros. Discovery’s future prospects.

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