So the idea that entertainment giant Warner Bros. Discovery (WBD) might get bought by Netflix (NFLX) took a bit of a hole below the waterline recently. Netflix co-CEO Greg Peters came out and noted that media deals “…don’t have an amazing track record.” While the door has not been completely closed, the idea may still be on thin ice. Warner stock lost fractionally in the closing minutes of Thursday’s trading.
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While at the Bloomberg Screentime conference, Peters had a certain amount of disdain for the idea. Peters noted that Netflix’s history is one more of building than of buying, and that media deals do not often have a terrific “…track record over the history of time.” Peters also noted, “I would say it’s our responsibility to evaluate all our options.”
Plus, Netflix may have something heavier on its mind right now, a decline in growth rates of user engagement. In fact, Netflix’s user engagement has been a bit flat of late, and Netflix is looking for a way to perk it back up. Having the entirety of the Warner content library on your side would likely go a long way in that sense, Greg. Not to mention the Warner studio lots, which would open up the ability to make just about anything.
Why Should We Even Bother?
That was when another report emerged, one that wonders if Warner should even bother selling out in the first place. To do that, reports noted, all David Zaslav need do is convince shareholders that a broken-up Warner is more valuable than a sold-off Warner. One analyst report is providing a lot of support on that end.
Bank of America analyst Jessica Reif Ehrlich—who has a four-star rating on TipRanks—recently noted that a split-off Warner could be worth $30 per share, which is a far cry from the top range of $24 per share heard in previous reports. Without the linear television operations, and the debt load, Warner is likely to be a lot more valuable when it can focus on streaming and studio content. But Ehrlich also thinks that the linear arm is also undervalued by the market, as it could grab a big chunk of the European market on its own. The European market has not been cable-cutting to the degree the United States has, reports noted.
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 11 Holds assigned in the past three months, as indicated by the graphic below. After a 137.27% rally in its share price over the past year, the average WBD price target of $17.82 per share implies 0.08% upside potential.
