You really have to give Paramount Skydance (PSKY) credit, as it carries on with its effort to buy entertainment giant Warner Bros. Discovery (WBD). It has been turned away multiple times, and yet, it persists in its attempt to acquire its rival studio. It is taking about the only route it has left, and seems to be trying to taint the pool of regulatory awareness against Netflix (NFLX), which is on track to buy Warner. Investors did not take this well either, and sent Warner shares down fractionally in the closing minutes of Thursday’s trading.
Claim 50% Off TipRanks Premium
- Unlock hedge fund-level data and powerful investing tools for smarter, sharper decisions
- Stay ahead of the market with the latest news and analysis and maximize your portfolio's potential
Paramount is making it clear that, should it end up with Warner, it will do what it can to foster competition, a point that might actually make it more palatable to regulators. It has also filed a preliminary proxy statement that formally challenged the transaction, though recent reports suggest that the proxy battle is not going well for Paramount.
Paramount also called into question Netflix’s position as a potential monopoly figure, and how being allowed to acquire Warner would simply cement that status. It is unclear how well this strategy will work, but given the current sentiment around the deal—stopping the Netflix deal seems to have bipartisan support—it may be the only real strategy Paramount can use.
Committed to Theaters
Paramount’s CEO, David Ellison, is also working to taint the pool in Europe against Netflix, and went there to promise there would be no shortage of theatrical releases overseas. Ellison noted that Paramount would guarantee at least 45 days of theatrical window, reaching up to 90 days, before home viewing was allowed.
Ellison also guaranteed that HBO would remain independent, and promised to stick to current third-party licensing systems along with continuing to buy content from both rival studios and independent productions as well. Numbers would also not falter; Ellison promised 15 “high-quality” films from Warner every year to match Paramount’s plan for 15 releases a year, nearly doubled from the original eight.
Is WBD Stock a Good Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on WBD stock based on four Buys and 11 Holds assigned in the past three months, as indicated by the graphic below. After a 165% rally in its share price over the past year, the average WBD price target of $25.80 per share implies 3.55% downside risk.
