For the last couple of weeks now, investors’ minds have been downright captivated by drama between entertainment giant Warner Bros. Discovery (WBD) and the various competitors that were thinking about buying it. While the deals are not yet materializing, the idea is still there, though a friendly deal between Warner and Paramount Skydance (PSKY) looks a bit unlikely now. This was bad news for Warner, as shares slid nearly 3% in the closing minutes of Thursday’s trading.
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CNBC‘s David Faber made it pretty clear: A friendly deal between Warner and Paramount is looking fairly unlikely. By way of expansion, Faber noted “My expectation is that Paramount will make an offer, that they will not be able to get something done friendly via conversation and therefore will have to come forward with an offer and then it will be up to the board of directors.”
This report comes after an earlier report from KeyBanc, where analyst Brandon Nispel—who has a four-star rating on TipRanks—noted that the bidding war that David Zaslav was likely hoping for was unlikely to materialize. It is still possible, of course; this is particularly true if Netflix (NFLX) decides to get involved. But if Paramount Skydance is the only one on the field, then a bidding war is definitely out.
Overplaying His Hand?
The KeyBanc report also had more to say on that front, including the very real possibility that David Zaslav was overplaying his hand in terms of a potential buyout. Reports suggest that Zaslav is holding out for $40 a share, which represents more than double Warner’s current share price. This is making KeyBanc extremely “nervous,” reports noted.
Certainly, the news is not all bad at Warner. Even KeyBanc admits that it likes the overall improvement seen at Warner in recent months. But looking for more than double current share prices would all but require a bidding war with multiple interested parties. There were some possibilities on that front, beyond just Netflix, but none of them seem to be making much progress toward an actual offer.
Is WBD Stock a Good Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on WBD stock based on five Buys and nine Holds assigned in the past three months, as indicated by the graphic below. After a 136.48% rally in its share price over the past year, the average WBD price target of $15.04 per share implies 20.47% downside risk.
