So the events of the last few days have demonstrated, in great detail, that the race to buy entertainment giant Warner Bros. Discovery (WBD) is more complex than anyone might have thought. In fact, new reports suggest that the whole thing may ultimately come down to Warner’s stock of cable channels which, originally, would have been Discovery Global before the buyout process hit. Regardless, though, shareholders were happy to see how things were going, and shares gained nearly 4.5% in the closing minutes of Wednesday’s trading.
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Right now, we know, there are two parties left in the race to get hands on Warner: Netflix (NFLX) and Paramount Skydance (PSKY). Comcast (CMCSA) officially pulled out of the running days ago, reports note, before Paramount launched its hostile takeover bid. But there is a key difference: Netflix is after the studios and streaming business. Paramount wants the whole thing, including the linear television channels. Paramount believes those would put it on an even keel with Disney (DIS), which owns a panoply of stations itself.
It is the kind of thing that makes a good case directly to shareholders, which Paramount is reportedly trying to do. Not only is Paramount’s offer significantly more than Netflix’s—reports note Netflix is offering $27.75 per share, while Paramount is around $30—but also, Paramount is out to put the entire business to work, including the linear content. David Ellison noted, “When you look at the linear portfolio, there are significant synergies. And when you look at what we can do with CBS, which is a crown jewel asset, all linear is not equivalent.”
The Fallout to You, The Viewer
Meanwhile, some are starting to wonder just what all this means to them. While theater owners are scared green over Netflix taking over Warner and potentially rendering that whole stock unavailable to them after the current contracts expire, there are similar concerns for Paramount too. Not that Paramount will ignore theater owners, but rather, that Warner will be folded into Paramount and thus reduce the stock of movies available. One studio can only produce so much content.
Thus, viewers will likely be left with further price hikes and declining theatrical releases as the future seems to be increasingly about streaming and platforms like TikTok. Further job loss is also likely to follow, as once again, consolidation begins and more redundant positions are cut.
Is WBD Stock a Good Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on WBD stock based on eight Buys and 12 Holds assigned in the past three months, as indicated by the graphic below. After a 161.18% rally in its share price over the past year, the average WBD price target of $22.65 per share implies 23.3% downside risk.
