As it turns out, when entertainment giant Warner Bros. Discovery (WBD) spins off into two entities—the studio and streaming arm of Warner Bros., and the mostly television arm of Discovery Global—Discovery Global will have more going for it than a decomposing business model and a load of debt. It will also have 20% of the studio operation in its back pocket. It may not have that for long, though, and that revelation helped send shares down. Warner shares dropped nearly 1.5% in the closing minutes of Thursday’s trading.
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Reports note that there are already buyers who have an interest in Discovery Global’s upcoming 20% stake in Warner, and soon-to-be CEO Gunnar Wiedenfels may have an interest in selling. In fact, there is sufficient interest that Bank of America media analyst Jessica Reif Ehrlich—who has a four-star rating on TipRanks—asked Wiedenfels if he would be interested in selling before the split even happens.
Wiedenfels responded that he might actually be, but he did not want to sell too early. Rather, he wanted to “get full value” for the stake in question. Wiedenfels called it “…a huge building block in this whole transaction,” and one that will likely be helpful in light of the debt that Discovery Global will have on its books when the split takes place.
Speaking of that Debt….
Early word came out about the split, and some of the details were particularly, well, stark. Give Warner credit; Warner Bros. Discovery looks to reduce its debt load substantially by the end of the year. That is a good thing, because right now, it is currently somewhere around $30 billion. Discovery Global will also, reports note, end up with the lion’s share of the $17 billion bridge loan.
The latest round of financial guidance also looks for the studio arm to pull in around $2.4 billion, and the streaming operations to pull in another $1.3 billion on top of that. This is also welcome, because Warner forecasts an increase in sports expenses. Those are expected to go up $300 million for 2025, and that does not even factor in the Olympics.
Is WBD Stock a Good Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on WBD stock based on 10 Buys and seven Holds assigned in the past three months, as indicated by the graphic below. After a 60.66% rally in its share price over the past year, the average WBD price target of $13.86 per share implies 17.81% upside potential.
