Bernstein SocGen Group Reiterates Market Perform Rating on Warner Brothers Discovery (WBD)

Bernstein SocGen Group analyst Laurent Yoon reiterated a Market Perform rating and $13.00 price target on Warner Brothers Discovery (NASDAQ: WBD).

The analyst commented: "For subscale players in Media, WBD would serve as an enabler of long-term growth and commands a premium. After all, an asset like this won’t be on the block for many years to come. This is it. Per our earlier note , we believe the appropriate range for S&S alone is $16-$20, implying 12 to 14x 2027 EBITDA [Exhibit 8 ]. Although many dismisses the rapidly declining Linear business as insignificant, it’s hard to ignore that it generates >$6B in EBITDA with a high FCF conversion rate. For strategic buyers like PSKY, we anticipate significant operating synergies - think corp functions, ad ops/sales, marketing, tech platforms, studio properties, etc. - that could drive up expectations higher. But this Game of Thrones isn’t over yet. This is a once-in-a-decade opportunity, once in-a-lifetime opportunity for some decision makers. Could there be another bidder? We wouldn’t rule that out just yet. However, the backing of the Ellison family - with a war chest that just got bigger by >$100 billion yesterday - might make others hesitate. No one else may show up, but everyone’s thinking. Could they offer a lower price than its current trading level? It’s possible, but unlikely, because S&S, when separated, will no longer be in a dire situation. It is expected to perform well with a growing Streaming segment and a recovering Studios division, not to mention a clean(er) balance sheet. In short, they don’t have to sell - at least not in the foreseeable future. The offer has to make sense for all parties/individuals involved. If a deal doesn’t materialize in this round, WBD stock could give back some gains. But the separation is moving forward, S&S will be stronger on the other side, and PSKY - or any potential bidder - surely knows it."

For an analyst ratings summary and ratings history on Warner Brothers Discovery click here. For more ratings news on Warner Brothers Discovery click here.

Shares of Warner Brothers Discovery closed at $16.17 yesterday.

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