Mitchelson’s bear case includes significant execution challenges at a large, complex organization the need to reduce HBO Max churn concerns over streaming costs and jitters at ongoing subscriber and viewing declines in linear television. “We see 3 potential long-term outcomes: (1) streaming success (2) streaming not successful and mgmt reverts to high margin wholesaler (licensor) or (3) M&A (whoever buys/merges with WBD becomes the instant global content/streaming leader).” Wall Streeters have suggested that Comcast in particular could/should wait a year or two, then buy WBD. Warner Bros Discovery Merger: Who’s In, Who’s Out In The Executive Ranks His stock rating is ‘outperform’ and target price $52.
NASDAQ WBD TV
‘You Brought Me The Ocean’ TV Series, Based On DC Comic, In Works At HBO Max From Charlize TheronĬreditSuisse’s Doug Mitchelson laid out both a ‘WBD Day 1 Bull Case’ and a ‘Bear Case,’ landing in the bull camp given, he said, WBD’s “global content, strong scale position in library, brands, franchises, size of studios and content spending, global distribution and reach, and overall resources.” He noted management’s experience with mergers (Discovery under David Zaslav acquired Scripps Networks in 2018 and did a great job putting the two together) and its healthy free cash flow. He rated WBD stock “outperform” with a $40 price target. He touted the combination of HBO Max and discovery+ into a single service as highly synergistic, “with HBO Max bringing the expensive, flashy originals needed to acquire customers, and discovery+’s unscripted content providing the large library of content needed to retain those customers.” And he sees increased scale in legacy television boosting revenue and margins there. Longer term, Jayant is pretty bullish on the creation of the “second largest media company after Disney,” citing 2021 revenues of $46B, a content budget of over $20B annually supporting a library with over 200K hours of programming, and the assets to successfully compete in the global DTC business. That likely means “meaningful supply pressure” on the shares post-merger, said Evercore ISI analyst Vijay Jayant, as the “lack of a dividend at WBD could result in a substantial flow back of stock from existing AT&T shareholders.” But only temporarily. And most institutional ownership is primarily by income funds that were also attracted by AT&T’s high dividend yield.
That’s high compared with about 20% for U.S. Rowling Says & MoreĪbout 45% of AT&T shares are held by retail investors (or individuals, vs institutions).
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