Warner Bros. Discovery price target raised to $18 from $13 at KeyBanc

KeyBanc raised the firm’s price target on Warner Bros. Discovery (WBD) to $18 from $13 and keeps an Overweight rating on the shares. The firm sees the Q2 setup as positive, as it expects Warner Bros. Discovery to beat on total revenue/adjusted EBITDA with Studios and direct-to-consumer upside. KeyBanc further expects to hear DTC EBITDA guidance raised to over $1.4B and expects Studios EBITDA to improve close to $2.5B in 2025. Looking forward, the firm thinks the recent tender offer should improve net leverage by about $3B, and result in consolidated leverage of 3.5-turns by year-end 2025. Lastly, KeyBanc believes the S&S spin from Global Networks should unlock value for shareholders, where it values S&S at about 11-times pro forma EBITDA and Global Networks at 6-times EBITDA. While its conviction level is lower given the stock performance, the firm thinks the downside is protected through improving fundamentals and the upside is potentially uncapped, as the market looks to value the world’s largest Film/TV Studio and HBO Max, a top 5 streaming service.