This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). I have no business relationship with any company whose stock is mentioned in this article. I wrote this article myself, and it expresses my own opinions. The announcement has brought out financial gurus to assess whether Warner Bros. Discovery stock looks like a good buy after the merger with WarnerMedia. All rights reserved. We will not sort of chase aggressively behind subscriber growth. And given that Q1 performance and previously unplanned projects in sight, I currently estimate the WarnerMedia part of our profit baseline for 2022 will be around $500 million lower than what I had anticipated. There is meaningful churn on HBO Max, much higher than the churn that we have seen. To make the world smarter, happier, and richer. So, in order to really do a split, you are going to have to create enough demand for that 1.7 billion for an AT&T shareholder base that is dividend-focused retail investors and income-focused funds, which represent 60 to 70 percent of the telecom conglomerates total investors and likely would not participate in this structure, the AT&T CFO explained. Discovery's first earnings report post-merger might also have added fuel to the fire. In the big deal, expected to close during the second quarter, AT&T will next spin off WarnerMedia and merge it with Discovery, with AT&T shareholders set to receive an estimated 0.24 share in the new company for each AT&T share held. Following the merger early last month, WBD ranks as the number-three player in the U.S. video streaming business behind Netflix and Disney. AT&T shareholders will own 71 percent of the merged firm, with Discovery shareholders owning the rest. Zaslav hasnt been shy in making changes that align with the Warner Bros. Discovery planned to keep Discovery+ as a standalone streaming platform, as the company weighs how to make more of its content available in a single place. Discovery (DISCA) stock is trading sharply higher on May 17 after it announced a definitive agreement to combine with AT&Ts media assets. Warner Bros. Discovery stock was up 5% in midday trading on the stock market today, near 32.50. Discovery has faced more cautious advertisers, ongoing cord-cutting, competition within streaming and upheaval created from the merger deal itself. These are high-margin services that AT&T needs to get right, and where it's up against stiff competition in the telecom space. I am not receiving compensation for it (other than from Seeking Alpha). It's worth noting that these forecasts were before Discoverys merger announcement. I will add that an investment in this company at this stage requires a bit of faith in managements ability to execute, as well as analysts aptitude in forecasting growth rates for Warner Bros. In 2000, internet service provider America Online bought Time-Warner, Inc. to form AOL Time Warner, but when the dot-com bubble burst, that partnership dissolved quickly. Madonna Breaks Silence on Death of Brother Anthony Ciccone: You Planted Many Important Seeds, Paramount CFO: Streaming Content Spending Could Come in Below $6B Target In 2024, BBC Journalism Union Members Vote in Favor of Strike. assets separated, considerations paid, regulatory approvals received, etc.) He recently completed a technical communication diploma and holds previous university degrees in journalism, sociology and criminology. Discovery, Wall Street is turning its attention to the outlook for the new conglomerates stock that began trading on Monday under the ticker symbol WBD.. However, most of the analysts rate the stock as a hold or some equivalent. Is this happening to you frequently? to create Warner Bros. Based on the latest update per disclosures in AT&T's 8K filing dated March 28th, the estimated value of the transaction is approximately $83.4 billion. HBO Max and Discovery Plus will be merged into a single digital platform under Warner Bros. The Hollywood Reporter is a part of Penske Media Corporation. Discovery merger, AT&T and Discovery Communications shareholders have decisions to make. Copyright 2023 ComicBook.com. Desroches also said on Monday that Stankey deserves enormous credit for the transformation of the company over his term so far as CEO, which has not even been two years. This increased its subscriber numbers to 76.8 million. The approximate 1,709 million shares of WBD common stock attributable to AT&T shareholders post-close is also validated based on the 0.24-to-1 WBD share distribution ratio for each AT&T share outstanding computed as follows: The 698 million Discovery shares outstanding on a fully diluted basis is computed as follows: Together, shares of WBD common stock allocated to AT&T and Discovery shareholders will total approximately 2,407 billion units as disclosed per AT&T's latest 8K filling. All relevant risks are not covered in this article. Q1 operating profit and cash flow for WarnerMedia were clearly below my expectations. Discovery had done a nice job of consolidating the unscripted content portion of the media universe, but it was still a relative niche player in a world with emerging mega-bundles. See: 9 Bills You Should Never Put on AutopayFind: 7 Things You Should Never Do When Planning For Retirement. However, the media merger has thus far been a Erik Khalitov/iStock Unreleased via Getty Images. In our previous coverage, we had determined the potential upside potential in WBD attributable to AT&T shareholders to be about 77% considering (i) AT&T's share price of about $24 at the time (late March), (ii) management's projected 2024 WBD revenues and EBITDA, as well as (iii) comparable peer valuation multiples: WBD Upside Potential Attributable to AT&T Shareholders (Author). AT&T shares fell in pre-market trading and were down 4.3 percent to $24.40 as of 7:45 a.m. I seek a degree of safety in my investments by concentratingon companies with competitive advantages and strong balance sheets. Price as of February 28, 2023, 4:00 p.m. On a GAAP basis, analysts polled by FactSet expected Warner Bros. When you are thinking about how to As Stock Market Cools, Experts Advise How To Brace for the Worst. I am not receiving compensation for it (other than from Seeking Alpha). It has been awful time for investors in media company Warner Bros. WBD projects $20 billion in content spend in 2022. Discovery's Stock, 2 Growth Stocks That Can Turn $250,000 Into $1 Million by 2030, Billionaire Investor Bill Ackman Is Raking In $97 Million In Annual Dividend Income From These 2 Stocks, 1 Bargain-Basement Warren Buffett Stock Down 78% to Buy Before It Starts Soaring, 3 No-Brainer Stocks to Buy With $50 Right Now, Join Over Half a Million Premium Members And Get More In-Depth Stock Guidance and Research, Motley Fool Issues Rare All In Buy Alert, Copyright, Trademark and Patent Information. (I update this score on at least a quarterly basis for readers.). -0.30% Echoing our thoughts from the previous coverage, we believe the fast-approaching WBD spinoff will be a promising play for participating AT&T investors. My valuation requirements, combined with the high quality companies that I often highlight mean many stocks I rate as a hold perform well over the long term. An analysis by Realgood revealed that WBD can boast of the largest number of high quality movies, defined as those that score 7.5 or more on IMDb, as well as the largest number of TV shows of any streaming service. In the merger presentation, AT&T said it will pay out about 40% to 43% of free cash flow as its dividend, while giving a $20 billion-plus estimate for free cash flow 16 Million Approved for Biden Student Loan Forgiveness Plan Will Supreme Court Uphold? Cost basis and return based on previous market day close. AT&T shareholders are set to receive an estimated 0.24 share in the new company for each AT&T share held. An SEC filing last March, just prior to the merger, revealed that Discovery forecasts revenue from its U.S. linear TV business will decline by 4% per annum through 2025, while expenses are expected to accelerate. During the earnings call, management noted HBO Max streaming service recently reported a gain of three million subscribers. Bill Peters is a Los Angeles-based MarketWatch reporter who covers earnings. What's been going on and is now the time to sell out of the stock? We had previously estimated about 2.4 billion WBD shares outstanding post-close according to AT&T's stock dividend structure of 0.24 WBD shares for each AT&T share. have both fallen around 25%, and Netflix (. ) An SEC filing last March, just prior to the merger, revealed that Discovery forecasts revenue from its U.S. linear TV business will decline by 4% per annum through Discovery ("WBD"). Discovery, they discovered that the previous management had been overly optimistic with their projection of Warner Bros. prospects. The new management is trying hard to turn around the ship. I wrote this article myself, and it expresses my own opinions. I am a graduate of the U.S Army Ranger school and a former member of the 1st Ranger Battalion and The Old Guard (U.S Army Honor Guard.) If you have an ad-blocker enabled you may be blocked from proceeding. The new company will be able to compete in the streaming industry. This is according to TipRanks, which provides a 65% success rate and an average 17.6% annual return for my articles. Consequently, I rate WBD as a HOLD. Based on 14 ratings, nine analysts had WBD stock as a moderate buy, five rated it as a hold, and only one appraiser had the company as a sell. To put that in perspective, Disney+ has over 103 million subscribers, while Netflix has around 208 million subscribers. Step 6 The Reclassification - Prior to the completion of the WBD merger, Discovery will "amend and restate the "Discovery charter" to outline the Discovery-to-WBD share conversion structure for each of its Series A, B and C common stocks and Series A-1 and C-1 preferred stocks as discussed in the "WarnerMedia Spinoff Share Structure" section above. Warner Bros. Discoverys revenue fell short of expectations in Q4 as the company lost more than $2 billion on linear, streaming, & studio. Among the reports that came out of the first week of Warner Bros. Now that the close of the WarnerMedia deal is approaching, we are near the starting line of a new era for AT&T, said Stankey on Friday. We currently are holding a limited-time sale with 10% off your first year! There is no doubt that WBD will possess a formidable content portfolio. The management team has plenty of experience executing mergers. On the closing date of the transaction, anticipated to be in April, AT&T shareholders will receive, on a tax-free basis, an estimated 0.24 shares of stock in However, just because it's probably the right move doesn't mean AT&T shareholders should be overjoyed. Warner Bros. Leading up to WBDs second quarter earnings report, a number of equities analysts issued ratings statements and reduced price objectives for the company, including Cowen ($24, May 12), Bank of America ($23, July 14) and Moffett Nathanson ($18, July 22). AT&Ts WarnerMedia unit and Discovery Inc said on Friday that the two firms have completed the merger. NEW YORK and DALLAS, April 8, 2022 Today Discovery, Inc. and AT&T Inc. * ( NYSE:T) announced that they have closed their transaction to combine the In a filing in December, Warner Bros. Understanding how profitable the company is in relation to its stock price can be an important consideration 3M is a major American corporation with over 60,000 products in its portfolio. I have no business relationship with any company whose stock is mentioned in this article. The forecast is for adjusted EBITDA of $14 billion with an FCF conversion rate of 60% in 2023. In addition, Discovery didn't have a dividend prior to this announcement, while AT&T was a former Dividend Aristocrat that will cut its dividend in half in the wake of the deal. Fallen around 25 %, and it expresses my own opinions post-merger also! 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