The forward P/E for the company is 8.68x, and the 5-year PEG is 0.43x. Warner Brothers has over 100,000 hours of programming including 8,600 feature films and 5,000 TV programs in its content library. However, those that looked to streaming companies to build a portfolio are in much worse shape. The Motley Fool has a disclosure policy. Financial Insight in Your Inbox: Sign Up for GBR's Daily Newsletter, Maximize your savings with these 3 expert tips. Controlling interest of the studio was sold to Seven Arts Productions in 1966, but Jack Warner, still managing the studio, had a confrontational relationship with them and by 1969, Seven Arts sold Warner to Kinney National Company. Many of the offers appearing on this site are from advertisers from which this website receives compensation for being listed here. The future of WarnerMedia was for a long time undecided until AT&T eventually divulged the details of a massive merger with Discovery. However, a significant share of WBDs revenue is derived from the companys cable business, and it is no secret that cable is experiencing a secular decline. They expected a subscriber count of around 96.33 million. As of Aug. 5, MarketBeat lists Warner Bros. If so, how? A merger rarely goes without hiccups, so while the dip in Warner Bros. AT&T shareholders are set to receive an estimated 0.24 share in the new company for each AT&T share held. To put that in perspective, Disney+ has over 103 million subscribers, while Netflix has around 208 million subscribers. The merger also benefited AT&T's share prices, although not quite as much; most of the money from the acquisition is going to go into clearing out some of the telecom giant's debt in the coming months. At the time of the merger, AT&T's investors owned around 70% of the combined company, so there were lots of shareholders who might have sold to get the new ticker out of their portfolio. The thinking is that this could lead to a surge in subs when the two services are combined. That sale is being blamed for the slow pace of renewals for some of The CW's shows, including the Warner Bros.-ownedDC's Legends of TomorrowandBatwoman, and CBS'sCharmedandDynasty. Of course, the numbers behind the earnings report pertain to the former Discovery, Inc; however, management provided some important metrics related to WarnerMedia, as well as some relevant commentary. Discovery, they discovered that the previous management had been overly optimistic with their projection of Warner Bros. prospects. However, we have taken additional consideration of the valuation sensitivity analysis performed by the WBD transaction advisors, Allen & Company and J.P. Morgan, as disclosed in AT&T's most recent 8K filing dated March 28th to further gauge the upside potential in WBD post-close. Please disable your ad-blocker and refresh. has been completed,direct to consumer (DTC)losses peaked in22 with a path to breakeven in24 and the cyclical headwinds should abate as macro conditions improve.. Discovery, which has no dividend. Discovery stock is a bargain buy Warner Bros. Trading AT&T and Discovery After $43 Billion Media Merger AT&T and Discovery have come to terms on a $43 billion media deal. The blended average of the combined WBD valuation range with and without synergies is about $102.2 billion to $153.8 billion. I wrote this article myself, and it expresses my own opinions. Understanding how you are investing is just as important as what you are investing in. Learn More. There will likely be a short gap period between the record date and the ultimate transaction closing date with WBD listed to Nasdaq to ensure all closing conditions (e.g. Market Realist is a registered trademark. Discovery (WBD -2.01%). Poorer than expected performance of late from WarnerMedia was also highlighted. While cautious about an already crowded streaming market and international expansion issues, Morningstar analyst Neil Macker is bullish on the company, sharing an estimated share price of $40 and an enthusiastic outlook for the media conglomerates capacity for growth. It had been up as much as 9% in morning trading but has been in a They added that advertising trends in January appeared to have improved from December. Management discussed a number of concerns to be addressed now that the merger is complete. The transaction will take place over seven detailed steps, and will likely close within the next two weeks, consistent with the transaction plan stipulated in the March 28th 8K filing as well as management's intention to close the deal within April. Only about a quarter of the analysts rated the stock as a buy. These issued Spinco common stocks can be exchanged for 0.24 WBD common stocks post-close based on the stock dividend exchange ratio previously discussed. 2022 was mired by a combination of company-specific, merger-related headwinds along with cyclical and secular pressures, they continued. I have no business relationship with any company whose stock is mentioned in this article. Likewise, it's possible that Discovery had plenty of shareholders who didn't believe in the vision of a combined company and they could have sold their shares. The new company will be able to compete in the streaming industry. Discovery ended last week with their stock up 3%, following the successful acquisition of AT&T's WarnerMedia subsidiary by Discovery. -0.30% As part of the agreement, AT&T will get The merger with Discovery has the above-stated benefits for AT&T, including significantly reduced debt. In other words, if an AT&T shareholder decides to sell an AT&T share under Ex-Distribution Trading between April 4th and the WBD transaction completion date, they will only be retaining rights to the WBD shares distributed to them as a result of their AT&T share ownership as of the record date (April 5th market close). By comparison, the S&P 500 index Together, these adverse developments impacted Warner Bros. If you want full access to our Model Portfolio and all our current Top Picks, feel free to join us for a 2-week free trial at High Dividend Opportunities. With over 40 individual picks yielding +7%, you can supercharge your retirement portfolio right away. It may be counterintuitive for me to be bullish on Discovery but not as much on AT&T, but remember, AT&T is a $225 billion market cap behemoth that's splitting up, while Discovery is a mere $17 billion company merging into something bigger. AT&T stockholders will end up owning 71 percent of the new Warner Bros. Price as of February 28, 2023, 4:00 p.m. As a result, the new team reduced earnings projections by about $2 billion. On the valuation front for WBD post-close, we had previously projected an IPO price of about $23 based on the AT&T-to-WBD share conversion structure that AT&T had disclosed in February. One of the keys to HBO's growth is international markets, where it has lagged behind Netflix and others. At the end of 2021, the pro forma debt for WBD was over $56 billion. In addition to announcing April 5th as the record date for AT&T shareholders eligible for the special stock dividend pertaining to the WarnerMedia spinoff, the telecom giant also submitted a 652-page filing to the SEC, covering every "nitty-gritty" detail from pro-forma historical WarnerMedia statement of operations that were not previously available, all the way down to key terms of the merger agreement with Discovery (Nasdaq: DISCK, DISCA, DISCB) to create Warner Bros. Discovery (WBD) CEO David Zaslav announced plans to combine HBO Max and Discovery+ into one streaming service. We feel really good about where we are.. I'll be launching in the near future with a legacy discount for early subscribers and I'll be sharing more details as we ramp up to launch in the coming months. Discovery ("WBD"). Members of High Dividend Opportunities get exclusive ideas and guidance to navigate any climate. I am a retail investor, with no formal training in investing. NFLX also held $6 billion in cash. Zaslav hasnt been shy in making changes that align with the Warner Bros. Discovery Stock Rises Following Merger Completion, Ricou Browning, Star of Creature From the Black Lagoon, Dies at 93, It's Always Sunny in Philadelphia Teases Gritty Cameo, Pokemon Cosplay Celebrates Misty's Anime Comeback, Burger King Adding Spicy Chicken Fries to Menu, Jon Hamm Reportedly Engaged to Mad Men Co-Star Anna Osceola, Josh Gad Takes Over as Jungle Cruise Skipper at Disneyland, AMC Theatres to Launch New Lines of Popcorn at Walmart. Discovery may need to fund losses for many years to build a sizable customer base. However, most of the analysts rate the stock as a hold or some equivalent. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). Year-to-date, Warner Bros. I could be characterized as a safety first investor. So, in order to really do a split, you are going to have to create enough demand for that 1.7 billion for an AT&T shareholder base that is dividend-focused retail investors and income-focused funds, which represent 60 to 70 percent of the telecom conglomerates total investors and likely would not participate in this structure, the AT&T CFO explained. In our last coverage on the upcoming WBD transaction and its implications for AT&T post-close, we had provided a detailed estimate on WBD's upside potential attributable to AT&T shareholders post-close. Bret Kenwell. However, based on the stock's performance so far, it seems other shareholders have had different opinions about the value of the deal, including those who got shares without taking any action. If you have taken a look at AT&T's latest 8K filling dated March 28th, you would notice that the filing registrant is "Magallanes, Inc.". Groundbreaking Chicago Mayor Lori Lightfoot loses reelection bid, Amid layoffs, Salesforce reportedly has been paying Matthew McConaughey more than $10 million a year, Why microchips could make or break the electric vehicle revolution, Marc Benioffs Salesforce fairy tale is crumbling down around him, Theranoss Elizabeth Holmes gives birth to second baby, pushes to delay starting her 11-year prison term, AMC stock tumbles after 14th consecutive quarterly loss, fourth straight year in the red. Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services. Invest better with The Motley Fool. The Motley Fool owns shares of and recommends Netflix. with the stock up over 60% year to date, reversing losses from 2022 When you buy stock, you're essentially buying a tiny piece of the company it represents. If you bought shares of the S&P 500 ETF SPY as 2022 dawned, you are down around 10%. Additional disclosure: I have no formal training in investing. Also, the company has started to benefit from the cost synergies, which partially mitigated the downsides. Among the reports that came out of the first week of Warner Bros. share conversion ratios, estimated WBD shares outstanding post-close, recent Discovery and AT&T closing share price, peer comps, etc.) After working in the energy industry for 18 years, he decided to change careers in 2016 and concentrate full-time on all aspects of writing. That same study revealed that when questioned regarding their level of satisfaction among SVOD services, HBOMax received the highest score. net asset value under U.S. federal income tax purposes $33 billion + $10 billion additional amount) transferred into the Spinco in transaction step #1: totaling $33 billion, which represents the estimated fair value of AT&T's equity interest in total WarnerMedia assets and liabilities to be transferred to Spinco as discussed in transaction step #2. -2.01% Now, after the merger is complete, we should look at the financials of the merged entity. Ex-Distribution Trading will take place under the temporary NYSE ticker "T WD" during the two-way trading period. Under the Reverse Morris Trust-Type Transaction method, the parent company (i.e. Discovery strategic shift. pertaining to the WarnerMedia spinoff, the telecom giant also submitted a, to the SEC, covering every "nitty-gritty" detail from pro-forma historical WarnerMedia statement of operations that were not previously available, all the way down to key terms of the merger agreement with. ) The idea is that Warners has not been fully capitalizing on the brand's potential. In the last quarter before the merger, AT&T reported 2.5% year-over-year revenue growth in its Warner segment, including 16% growth in the Direct-to-Consumer business. Should we prevent her from inheriting it? Discovery stock. are met. Wall Street will soon take note of the news and analysts might revise their ratings. To ensure this doesnt happen in the future, please enable Javascript and cookies in your browser. While Zaslav has not run a more traditional media company like WarnerMedia, the longtime Discovery CEO presided over the transition of the company from a cable network owner to an unscripted content creation powerhouse, said Macker. Stephen Fry to Host Jeopardy! for ITV in U.K. Cannes Film Festival Names Ruben stlund Jury President, Australias Foxtel Inks Multi-Year Deal to Retain Warner Bros. WBD will have paid down $7 billion in debt since the Discovery-WarnerMedia merger closed, but its still got a heavy load. David Nadelle is a freelance editor and writer based in Ottawa, Canada. The company the result of a merger last year between AT&Ts WarnerMedia and Discovery reported a fourth-quarter net loss of $2.08 billion, or 86 The Hollywood Reporter is a part of Penske Media Corporation. What the Smartest Investors Know About Warner Bros. The management team has plenty of experience executing mergers. WBD, Upon closing, Magallane, Inc. Spinco will merge with "Drake Subsidiary, Inc.", the wholly owned "merger subsidiary" of Discovery's to create WBD. The approximate 1,709 million shares of WBD common stock attributable to AT&T shareholders post-close is also validated based on the 0.24-to-1 WBD share distribution ratio for each AT&T share outstanding computed as follows: The 698 million Discovery shares outstanding on a fully diluted basis is computed as follows: Together, shares of WBD common stock allocated to AT&T and Discovery shareholders will total approximately 2,407 billion units as disclosed per AT&T's latest 8K filling. The streaming merger is the latest move from a management team firmly dedicated to Zaslavs more disciplined, cost-savings vision for the company. Net income for the quarter hit $456 million, with EPS of $0.69 cents. AT&T has applied an exchange ratio of 2.4483 (based on the quotient of 71% / 29% WBD post-close ownership structure) to about 698 million Discovery shares outstanding on a fully diluted basis as of March 9, 2022 to determine the allocation of approximately 1,709 million shares of WBD common stock to AT&T shareholders post-close. Since I require a discount in the share valuations of my investments, my ratings are generally very conservative. After combing through the additional information recently disclosed in AT&T's 652-page 8K filing pertaining to the transaction, we have better refined our estimates. There is meaningful churn on HBO Max, much higher than the churn that we have seen. Warner Bros. I wrote this article myself, and it expresses my own opinions. Discovery stock traded down more than 4% in early after-hours trading Thursday after fourth-quarter revenue badly missed analyst estimates.. Fourth-quarter revenue came in at $11.1 billion Discovery stock is trading higher after markets gave a thumbs up to the merger between Discovery and WarnerMedia. Discovery posted fourth-quarter 2022 earnings on Feb. 23, with revenue of $11.01 billion decreasing By favoring theatrical releases and traditional TV models, Zaslav is turning his back on the streaming-first philosophy championed by his predecessor, WarnerMedia CEO Jason Kilar, The WSJ detailed. Because of this gap period, AT&T will begin "two-way trading" until the WBD merger's completion. It's a busy time for Warner, who besides the Discovery merger are also reportedly in the market for a buyer for The CW, a network they co-own with Paramount, the parent company of CBS (and ComicBook.com). In February, the merger received approval from the U.S. Department of Justice, the key regulatory hurdle for the merger. Please. David has covered a wide variety of financial and lifestyle topics for numerous publications and has experience copywriting for the retail industry. In 2000, internet service provider America Online bought Time-Warner, Inc. to form AOL Time Warner, but when the dot-com bubble burst, that partnership dissolved quickly. AT&T and Discovery on Monday announced that they will merge their media assets in a megadeal that creates a stronger rival to Walt Disney and Netflix amid global WBD was trading at $24.88 before markets closed for the holiday weekend. Management expects 2023 EBITDA to reach $12 billion, up at least 26% from 2022's target of $9 billion to $9.5 billion. Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services. WarnerMedias domestic linear TV revenue is projected to decline by 2% annually through 2025. AT&T Regular Way Trading - AT&T shareholders can engage in "Regular Way Trading" during the two-way trading period if they wish to sell "both the share of AT&T common stock and the right to receive shares of WBD common stock in the transaction". Following the merger early last month, WBD ranks as the number-three player in the U.S. video streaming business behind Netflix and Disney. Warner Bros. During the earnings call, management noted HBO Max streaming service recently reported a gain of three million subscribers. At the time of the WarnerMedia and Discovery merger in April, Zaslav promised to find $3 billion in savings from the deal, per NBC. Discovery Inc. on Thursday tried to pitch 2023 as an expansion year one during which the media powerhouses studios will crank out more movies and try to ride the early success of its Hogwarts Legacy videogame. 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Require a discount in the U.S. video streaming business behind Netflix and.! A quarter of the keys to HBO 's growth is international markets, where it lagged... From advertisers from which this website receives compensation for being listed here article myself, and it expresses own... $ 102.2 billion to $ 153.8 billion subscribers, while Netflix has 208... Experience executing mergers capitalizing on the brand 's potential doesnt happen in future. Satisfaction among SVOD services, HBOMax received the highest score pressures, they continued the 5-year PEG is 0.43x,. Optimistic with their stock Up 3 %, you are investing in streaming business behind Netflix and others, Netflix. 208 million subscribers these issued Spinco common stocks post-close based on the brand 's potential AT financials.
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