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. Warner Bros. This is according to TipRanks, which provides a 65% success rate and an average 17.6% annual return for my articles. I have no business relationship with any company whose stock is mentioned in this article. Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services. NFLX has a projected net debt-to-adjusted EBITDA ratio of 1.3 for 2022. Upon completion of the transaction, AT&T shareholders will, together, own 71% equity interest in WBD, with Discovery shareholders owning the remainder 29%. Is this happening to you frequently? The estimated transaction value takes into consideration the closing price of $25.37 per share for Discovery Series A common stock as of March 9th, multiplied by 1.7 billion WBD shares allocated to AT&T shareholders, plus the additional $43 billion consideration (i.e. Invest better with The Motley Fool. To balance that debt, at the end of 2021, WBD had a bit over $4.1 billion in cash. James Gunn Reveals New Superman, Batman Movies and More, Warner Bros. The combination of issued Spinco Debt Securities and cash proceeds from Spinco Financing Agreements provided to AT&T as part of transaction step #2 must total $43 billion, which represents the total consideration paid by Spinco to AT&T in exchange for its equity interests in the assets and liabilities of WarnerMedia (i.e. However, just because it's probably the right move doesn't mean AT&T shareholders should be overjoyed. With over 40 individual picks yielding +7%, you can supercharge your retirement portfolio right away. We finally have the public debut today on the NASDAQ for the newly formed Warner Brothers Discovery that's going to be the new joint venture, the new streaming behemoth in the landscape. In an effort to shore up the bottom line, the company has cut jobs and content including CNN+ and a Batgirl film set for HBO Max. At least both companies won't be distracted with an adjacent industry anymore. And it will be available in 220 countries and 50 languages. Based on a combination of discounted cash flow analyses and EBITDA multiple-based valuation analyses performed by the respective transaction advisors on each of Discovery (equity value range: $30.6 billion to $43.1 billion) and WarnerMedia (equity value range: $55.9 billion to $94.3 billion without synergies; $87.3 billion to $127.1 billion with synergies), WBD has potential to reach a valuation range of $86.5 billion to $137.4 billon without synergies, and $117.9 billion to $170.2 billion with synergies post-close. WBD projects $20 billion in content spend in 2022. At this point, the majority of heavy lifting (related to restructuring charges etc.) Discovery, which has no dividend. 111). Discovery CEO David Zaslav will run the merged giant, with Discovery CFO Gunnar Wiedenfels serving as the new companys CFO. ET. I own a house with my husband and mother. In a race to create content, WBD is at a distinct disadvantage in terms of its balance sheet. 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. -0.30% Transaction details disclosed are pointing to upsides in WBD attributable to participating AT&T shareholders of more than 77%, which is consistent with our previous analysis in late March. Discovery reported a fourth-quarter net loss of $2.08 billion, or 86 cents a share, after a profit of $38 million, or 8 cents a share, in the same quarter in 2021. Chief Financial Officer Gunnar Wiedenfels, during Warner Bros. Discoverys I wrote this article myself, and it expresses my own opinions. : Holiday Haunt have been shelved. Please note that I am in the process of planning a subscription service with Seeking Alpha's Marketplace. They added that advertising trends in January appeared to have improved from December. What the Smartest Investors Know About Warner Bros. Erik Khalitov/iStock Unreleased via Getty Images. This is largely consistent with our previous estimated WBD valuation of about $102.5 billion outlined above, further corroborating the promising upside potential of the upcoming WBD merger for participating AT&T shareholders in the near-term. 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). After a financial scandal tarnished the Kinney brand, they became Warner Communications in 1972. Furthermore, unlike Netflix, management recently reported fairly robust subscription growth for Discovery and Warner Brothers. Before the merger announcement, Discovery was trading at an NTM PE multiple of 13.2x, which looked undervalued. With the WarnerMedia spinoff fast approaching, AT&T (NYSE:T) has uploaded a series of press releases last week detailing how the transaction will take place. The company also pointed to a weak macroeconomic environment and challenging dynamics in the streaming industry. The gap period will be at least a week (but complete within April according to the intended closing period proposed by management), considering AT&T will be required to provide Discovery with a list of AT&T shareholders eligible for shares of WBD common stock as of record date at least five business days prior to the actual stock dividend distribution. Please disable your ad-blocker and refresh. Youre reading a free article with opinions that may differ from The Motley Fools Premium Investing Services. Discovery, will start Poorer than expected performance of late from WarnerMedia was also highlighted. The mixed result is likely due to the intricacies of Discovery's different share classes, which carry different voting rights and liquidity. I could be characterized as a safety first investor. This segues into a comparison of WBDs financial firepower with that of its rivals. In other words, if an AT&T shareholder decides to sell an AT&T share under Ex-Distribution Trading between April 4th and the WBD transaction completion date, they will only be retaining rights to the WBD shares distributed to them as a result of their AT&T share ownership as of the record date (April 5th market close). As a result, the new team reduced earnings projections by about $2 billion. Bolstered by strong international results, WBD increased total revenue by 13% to $3.16 billion. The idea is that Warners has not been fully capitalizing on the brand's potential. Visit a quote page and your recently viewed tickers will be displayed here. 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. The new company, of which Discovery shareholders will own about 29%, should become more of a force in global streaming. In a filing in December, Warner Bros. Essentially, the issued Spinco common stocks represent the rights to shares of WBD common stock distributed to existing AT&T shareholders as of record date. Under the stated terms, AT&T will receive $43 billion from the merger in a combination of cash and equivalents, and the retention of debt. WBDs forward P/E and 5-year PEG ratio, if accurate, indicate the stock is trading at a bargain. WBD will have paid down $7 billion in debt since the Discovery-WarnerMedia merger closed, but its still got a heavy load. Discovery. 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. Instead of splitting, AT&T's WarnerMedia will be spinning-off and becoming Warner Bros. To ensure this doesnt happen in the future, please enable Javascript and cookies in your browser. As of 12/08/2022 I am rated among the top 3% of authors in terms of overall results. One of the keys to HBO's growth is international markets, where it has lagged behind Netflix and others. Shop Pay is an innovative payment solution developed by Shopify. Discovery Makes a Dramatic Strategic Shift, Up 57% and Climbing, This Stock Is Still a Bargain Buy in 2023. Discovery had reported 20 million subs as of Sept. 30 of 2021. Discovery stock after the merger has been unpleasant, management can still make adjustments to deliver value to shareholders over the long run. The new company might attract better valuation multiples as markets give premium valuations to streaming companies, while legacy media companies trade at tepid valuations. Discovery (WBD -2.01%). While most AT&T shareholders are income-focused, the WBD transaction could make an attractive one-time trade to capitalize on promising near-term upside potential resulting from a valuation re-rate event. WBDWV Trading - AT&T shareholders who wish to dispose of their right to shares of WBD common stock post-close between April 4th and the WBD transaction completion date can engage in "WBDWV Trading". In addition to announcing April 5th as the record date for AT&T shareholders eligible for the special stock dividend pertaining to the WarnerMedia spinoff, the telecom giant also submitted a 652-page filing to the SEC, covering every "nitty-gritty" detail from pro-forma historical WarnerMedia statement of operations that were not previously available, all the way down to key terms of the merger agreement with Discovery (Nasdaq: DISCK, DISCA, DISCB) to create Warner Bros. By favoring theatrical releases and traditional TV models, Zaslav is turning his back on the streaming-first philosophy championed by his predecessor, WarnerMedia CEO Jason Kilar, The WSJ detailed. Under the terms of the deal, which is structured as an all-stock transaction, AT&T would receive $43 billion in cash and debt with its shareholders controlling 71% of Bret Kenwell. My sister has always struggled with money and drugs. Copyright 2023 MarketWatch, Inc. All rights reserved. Networks jumped 7% to $1.93 billion while International Networks registered 25% growth to $1.23 billion. The potential synergies and economies of scale looked to position the combined company well to compete in the media and entertainment industry. Discovery ended last week with their stock up 3%, following the successful acquisition of AT&T's WarnerMedia subsidiary by Discovery. At the time of the WarnerMedia and Discovery merger in April, Zaslav promised to find $3 billion in savings from the deal, per NBC. 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Market Realist is a registered trademark. If you Jakub Porzycki / NurPhoto / Shutterstock.com. Should we prevent her from inheriting it? Also see: Succession creator says upcoming fourth season will be its last. Discovery transition into a direct-to-consumer powerhouse by focusing further investment in content and the user experience, which has garnered complaints on both HBO Max and Discovery+.. ), WBD Transaction Structure (AT&T 8K Filing, with annotations by Author), WBD Transaction Structure (AT&T 8K filing, with annotations by Author). Discovery shareholders would own 29 percent of the new entity, while AT&T shareholders would hold a 71 percent stake in the new company. Price as of February 28, 2023, 4:00 p.m. If you bought shares of the S&P 500 ETF SPY as 2022 dawned, you are down around 10%. To make the world smarter, happier, and richer. WBD was Now consider that Amazons (AMZN) cash and marketable securities totaled $96.1 billion at the end of 2021, and that Apples cash and investments totaled $205.6 billion at the end of 1Q22. These issued Spinco common stocks can be exchanged for 0.24 WBD common stocks post-close based on the stock dividend exchange ratio previously discussed. Youre reading a free article with opinions that may differ from The Motley Fools Premium Investing Services. There is currently no definitive answer to when the WBD merger will close or what its post-close value will be. After last years messy mega-merger, executives at Warner Bros. Of course, the numbers behind the earnings report pertain to the former Discovery, Inc; however, management provided some important metrics related to WarnerMedia, as well as some relevant commentary. 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.. On 7.14 billion current shares, that's about $1.18 per share, just a little more than half the $2.18 payout today. The resultant company, Warner Bros. Get advice on achieving your financial goals and stay up to date on the day's top financial stories. The strongest case for WBD is the massive supply of content associated with WarnerMedia. Step 5 The Distribution - Existing AT&T shareholders as of record date will receive one Spinco common stock for each AT&T common stock owned on the "Distribution Date" determined by the board of AT&T prior to completion of the WBD merger. Just a few years ago, the same team acquired and integrated Scripps Networks into Discovery. Discovery has faced more cautious advertisers, ongoing cord-cutting, competition within streaming and upheaval created from the merger deal itself. Discovery (DISCA) stock is trading sharply higher on May 17 after it announced a definitive agreement to combine with AT&Ts media assets. Revenue came in at $11 billion, compared with $3.19 billion in the prior-year quarter. I have no business relationship with any company whose stock is mentioned in this article. If content is king, an argument can be made that WBD takes the crown. Overall, the company revised adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to between $9 billion and $9.5 billion for 2022, down from the $10 billion forecast before the merger. To put that in perspective, Disney+ has over 103 million subscribers, while Netflix has around 208 million subscribers. The final green light for the megadeal came at a special shareholder meeting held online; shareholders of AT&T, led by CEO John Stankey, do not need to vote on the combination. The companies are also forecasting annual cost synergies of $3 billion. Latest Technology & Communications News and Updates. There has never been a split of this size that has been done, and to get enough investor interest, we would have to really discount the Warner Bros. The conversion will ultimately result in 71% AT&T shareholder ownership in WBD, with the remaining 29% ownership in WBD attributable to Discovery shareholders. The merger between HBO Max and Discovery+ is due to roll out in the summer of 2023, per Yahoo Finance, with international launches set to follow in 2024, said CFO Gunnar Wiedenfels at the earnings call. Ahead of the Warner Bros. totaling approximately $42 billion received from a combination of bridge loans, term loan credit agreements, note issuances, and revolving credit agreements obtained or completed through commitments with JPMorgan Chase Bank, Goldman Sachs Bank, Goldman Sachs Lending Partners LLC, and "certain other financial institutions". Discovery currently has 700 million shares outstanding, while 1.7 billion new shares will come to market as part of the transaction. Discovery Inc. on Thursday tried to pitch 2023 as an expansion year one during which the media powerhouses studios will crank out more movies and try to ride the early success of its Hogwarts Legacy videogame. His clients may own shares of the companies mentioned. Making the world smarter, happier, and richer. The Motley Fool owns shares of and recommends Netflix. Discovery CEO David Zaslav Likewise, it's possible that Discovery had plenty of shareholders who didn't believe in the vision of a combined company and they could have sold their shares. As part of the agreement, AT&T will get $43 billion in a mix of debt securities, cash, and WarnerMedias retention of certain debt. Apple, one of the largest tech giants in the world, designs and manufactures cell phones, laptops, and smart devices. Consequently, I rate WBD as a HOLD. The company previously expected $3 billion in annual run-rate synergies from the merger, but during the last earnings call, CFO Wiedenfels stated the $3 billion target might be conservative. Discovery ("WBD"). The streaming merger is the latest move from a management team firmly dedicated to Zaslavs more disciplined, cost-savings vision for the company. Management discussed a number of concerns to be addressed now that the merger is complete. 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. 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