Wolfe Research has upgraded Warner Bros. Discovery (WBD, Financials) to "peer perform" from "underperform," citing a balanced risk/reward outlook despite Warner Bros. Discovery’s $40 billion in gross debt.
The company says that enhancing trends at its Max streaming service might help stabilize the EBITDA of the business in general.
In its analysis, Wolfe Research pointed to Max's global expansion and the possibility of direct-to-consumer profitability as elements likely to increase Warner's free cash flow. This would provide the corporation with the means to lower debt and invest in better business divisions. Wolfe also sees chances for conventional TV distributors to adopt streaming services in tandem with linear networks.
Wolfe Research also participated in the last earnings conference of Warner Bros. Discovery, where management expressed interest in possible spin-offs or mergers within their portfolio. Changing political and commercial circumstances, including former President Trump's re-election campaign and Comcast's strategic actions, might boost possibilities for agreements that would increase value, particularly given historical difficulties in divesting legacy assets, said Wolfe.
Warner Bros. Discovery has struggled financially even with its wide range of films. The corporation recorded a $10 billion loss in the second quarter of 2024 mostly from a $9.1 billion write-down in its TV networks section among the dwindling cable market. The company's value has been further lowered by CEO David Zaslav's cost-cutting initiatives and strategic choices, including a conflict with the NBA over broadcast rights, therefore lowering the stock price greatly.
Regarding Warner Bros. Discovery, the company has not set a price goal. Year-to-date, WBD stock is down almost 20%.
