So while the move to sell off entertainment giant Warner Bros. Discovery (WBD) to Netflix (NFLX) looks like a done deal, the government is poised to get involved, and in a fashion that might make a Paramount Skydance (PSKY) purchase the only truly viable alternative. That news did not sit well with Warner shareholders, who sent shares down modestly in the closing minutes of Monday’s trading.
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Word from Brendan Carr, current chairman of the Federal Communications Commission, is that there are “…legitimate competition concerns…” over the deal between Netflix and Warner. Given that Netflix is the largest streaming provider out there, and reports suggest Warner’s HBO Max is fourth-largest, the idea that putting these two together could make a less-competitive environment is not out of line.
Carr, however, sees fewer problems from Paramount’s plan to buy Warner, as Paramount+ is a far smaller entity to begin with. However, the FCC has no jurisdiction in the Netflix / Warner deal. It would, however, have jurisdiction in the Paramount / Warner deal as it would turn to foreign sources for capital.
Aggressive Squabbling
The back-and-forth between Netflix and Paramount, meanwhile, is getting especially interesting. Both companies are actively ridiculing the others’ proposals now. Some of this we have actually already heard, with Warner calling Paramount’s plan an “inferior scheme.” But the squabbling seems to be actively spreading.
Netflix, for example, pointed out that Paramount’s bid for Warner featured a “crazy” amount of debt. Meanwhile, Paramount referred to Netflix’s bid as being packed with “…smoke and mirrors.” Indeed, at one point, Netflix brass pointed out, “Without Larry Ellison independently financing this thing, there’s no chance in hell Paramount would ever be able to pull this off.”
Is WBD Stock a Good Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on WBD stock based on five Buys and 10 Holds assigned in the past three months, as indicated by the graphic below. After a 172.45% rally in its share price over the past year, the average WBD price target of $25.61 per share implies 9.3% downside risk.
