WBD currently trades for $18.88 a share. Learn More. With a loss of 6% in 2022, Paramount Global (PARA) stands out as the winner, so to speak, among this bunch. Madonna Breaks Silence on Death of Brother Anthony Ciccone: You Planted Many Important Seeds, Paramount CFO: Streaming Content Spending Could Come in Below $6B Target In 2024, BBC Journalism Union Members Vote in Favor of Strike. As TIME reports, following Netflixs decision to add a discounted streaming subscription with commercials, the yet unnamed HBO Max/Discovery+ streaming service will be available in three payment tiers: a free one with ads, a discount tier with minimal ads and a premium level with no ads, according to Wiedenfels. Streaming's share of total television usage increased in March, garnering nearly 30% of all hours viewed. Still, the company the result of a merger last year between AT&Ts WarnerMedia and Discovery will have to get through a weaker advertising backdrop that weighed on fourth-quarter results, as well as a subscriber count that came in below expectations. DISCA stock looks like a good buy at the current prices. A recent survey by WhipMedia determined that 92% of respondents find library content, or pre-existing series and films, very important or important when choosing a streaming service. Discovery shareholders would own 29 percent of the new entity, while AT&T shareholders would hold a 71 percent stake in the new company. Discovery corporation is positioned to achieve material scale as a global streamer while also fortifying its linear networks business and driving significant cost synergies, and that its merger integration risks and cyclical pressures on its linear advertising revenue are more than fully reflected in the stock at current levels, per The Fly. If content is king, an argument can be made that WBD takes the crown. The potential synergies and economies of scale looked to position the combined company well to compete in the media and entertainment industry. Please try again later. Revenue came in at $11 billion, compared with $3.19 billion in the prior-year quarter. Here are the key levels for The streaming media and telecom worlds were shaken Monday, when AT&T (T -0.63%) announced it would be spinning off its WarnerMedia division and combining it with Discovery (DISCA) (DISCK). The estimated transaction value takes into consideration the closing price of $25.37 per share for Discovery Series A common stock as of March 9th, multiplied by Since I require a discount in the share valuations of my investments, my ratings are generally very conservative. Founded by four brothers in 1923, Warner Bros. is a giant in the film industry, but has changed hands more time than most fans can count. I seek a degree of safety in my investments by. Zaslav, in the companys earnings release, said that major restructuring decisions were behind us. However, Warner Bros. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Making the world smarter, happier, and richer. AT&T) wishing to divest a subsidiary (i.e. I am a retail investor, with no formal training in investing. 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. By comparison, the S&P 500 index Last but not least, with the focus by inventors on WBDs streaming service, there is little discussion regarding the fact that much of WBDs revenue stems from cable subscribers, and cord-cutting remains an ongoing issue. Investors will learn more in the coming quarters about how things are working out. I wrote this article myself, and it expresses my own opinions. Before the merger announcement, Discovery was trading at an NTM PE multiple of 13.2x, which looked undervalued. Apr 11, 2022 1:58 PM EDT. Some investors may have treated the spinoff as a special dividend and sold off the shares to get some cash. 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 The idea is that Warners has not been fully capitalizing on the brand's potential. Warner bros bring sold to Discovery? I have approximately 20 years experience as a retail investor. Discovery, will start Now consider that Amazons (AMZN) cash and marketable securities totaled $96.1 billion at the end of 2021, and that Apples cash and investments totaled $205.6 billion at the end of 1Q22. What's been going on and is now the time to sell out of the stock? Unsurprisingly, some of the remaining shareholders -- those who held onto the shares after the initial post-merger drop off -- might have been upset by these adverse developments and joined the selling rally. What the Smartest Investors Know About Warner Bros. It's worth noting that these forecasts were before Discoverys merger announcement. Although I endeavor to provide accurate data, there is a possibility that I inadvertently relay inaccurate or outdated information. 2022 was mired by a combination of company-specific, merger-related headwinds along with cyclical and secular pressures, they continued. Discovery. Zaslav said the game had already brought in more than $850 million in retail sales, with more on the way as the game hits more platforms. That distribution of Spinco common stock to eligible AT&T shareholders as of record date), which occurs prior to completion of the WBD merger. has fallen 5.8% over that period. The Spinco Financing Agreements allude to debt totaling approximately $42 billion received from a combination of bridge loans, term loan credit agreements, note issuances, and revolving credit agreements obtained or completed through commitments with JPMorgan Chase Bank, Goldman Sachs Bank, Goldman Sachs Lending Partners LLC, and "certain other financial institutions". Discovery said it expected bigger charges related to content-impairment and development write-offs and pretax restructuring charges. -0.30% I am a retired law enforcement officer. Members of High Dividend Opportunities get exclusive ideas and guidance to navigate any climate. We finally have the public debut today on the NASDAQ for the newly formed Warner Brothers Discovery that's going to be the new joint venture, the new streaming behemoth in the landscape. The company finished the quarter with 96.1 million subscribers. We will be a simpler, more focused company with the intent to become Americas best broadband provider.. We currently are holding a limited-time sale with 10% off your first year! 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). AT&T's shares were down 2.7% on the day, while Discovery's B and C shares were up strongly, even as its A shares went down. There is no doubt that WBD will possess a formidable content portfolio. Just a few years ago, the same team acquired and integrated Scripps Networks into Discovery. Discovery ("WBD"). For a time, it seemed like Warner was a big dog, buying up companies like DC Comics, Six Flags, and Lorimar. Should we prevent her from inheriting it? Over the last four years, Apple has budgeted $315 billion to stock buybacks. Another massive streaming giant round the corner? totaling approximately $42 billion received from a combination of bridge loans, term loan credit agreements, note issuances, and revolving credit agreements obtained or completed through commitments with JPMorgan Chase Bank, Goldman Sachs Bank, Goldman Sachs Lending Partners LLC, and "certain other financial institutions". Warner Bros. Together, these adverse developments impacted Warner Bros. This might explain the initial fall in Warner Bros. Copyright 2023 ComicBook.com. Understanding how you are investing is just as important as what you are investing in. Please note that I am in the process of planning a subscription service with Seeking Alpha's Marketplace. Discovery has faced more cautious advertisers, ongoing cord-cutting, competition within streaming and upheaval created from the merger deal itself. Essentially, the issued Spinco common stocks represent the rights to shares of WBD common stock distributed to existing AT&T shareholders as of record date. Please disable your ad-blocker and refresh. Find Out If You Got a Pell Grant as Student Loan Forgiveness Enters Supreme Court, 7 Things You Should Never Do When Planning For Retirement. 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. The final green light for the megadeal came at a special shareholder meeting held online; shareholders of AT&T, led by CEO John Stankey, do not need to vote on the combination. we also think that one of the big opportunities here is going to be churn reduction. Its options had been the spinoff, in which AT&T stockholders will receive shares in the merged company in addition to their existing AT&T shares; a split-off, which would have allowed shareholders to choose between stock of AT&T and the new company; or some combination of the two. Chief Financial Officer Gunnar Wiedenfels, during Warner Bros. Discoverys AT&T is also still behind competitors in 5G deployment, and is up against stiff competition in the fiber broadband space. In a research note to investors, Feldman said that the merged Warner Bros. After all, there has been a more chaotic revolving door over in the HBO C-suite since the merger with AT&T, with lots of turnover and restructuring. The companies are also forecasting annual cost synergies of $3 billion. After last years messy mega-merger, executives at Warner Bros. 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. Discovery transition into a direct-to-consumer powerhouse by focusing further investment in content and the user experience, which has garnered complaints on both HBO Max and Discovery+.. Discovery ("WBD"). Our focus is to invest in content and platforms that extend the life and return of our global IP, and position us to drive greater returns out of each dollar of content spend than our peers and to ultimately drive free cash flow. Discovery (NASDAQ:WBD) has slipped over 20%, Comcast (CMCSA) is down about 18%, shares of Disney (DIS) and Amazon (AMZN) have both fallen around 25%, and Netflix (NFLX) takes the proverbial cake, with a stock price that plummeted over 65%. 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. WBD projects $20 billion in content spend in 2022. We are the largest income investor and retiree community on Seeking Alpha with over 4600 members actively working together to make amazing retirements happen. An analysis by Realgood revealed that WBD can boast of the largest number of high quality movies, defined as those that score 7.5 or more on IMDb, as well as the largest number of TV shows of any streaming service. A merger rarely goes without hiccups, so while the dip in Warner Bros. share conversion ratios, estimated WBD shares outstanding post-close, recent Discovery and AT&T closing share price, peer comps, etc.) The Coke vs. Pepsi debate doesn't just apply to the supermarket the brands are also rivals in the stock market. Bret Kenwell. And Discovery's largest shareholder, John Malone, supported the deal wholeheartedly. Trading AT&T and Discovery After $43 Billion Media Merger AT&T and Discovery have come to terms on a $43 billion media deal. David has covered a wide variety of financial and lifestyle topics for numerous publications and has experience copywriting for the retail industry. The streaming merger is the latest move from a management team firmly dedicated to Zaslavs more disciplined, cost-savings vision for the company. Revenue from U.S. Discovery (WBD) CEO David Zaslav announced plans to combine HBO Max and Discovery+ into one streaming service. After all, the spinoff is tantamount to an admission of error on the hugely expensive 2018 acquisition of Time Warner, which was the signature move of prior management. If you have an ad-blocker enabled you may be blocked from proceeding. However, most of the analysts rate the stock as a hold or some equivalent. Discovery (WBD -2.01%). Discovery, which has no dividend. Discovery, Inc. AT&T stockholders will end up owning 71 percent of the new Warner Bros. Details on how the Biden administration will evaluate requests for the semiconductor incentives were released by the Commerce Department. AT&T announced last week that April 5th at market close will be the record date for AT&T shareholders eligible for the special stock dividend pertaining to the upcoming WBD transaction. According to the company's latest 8K filing, it estimates 2,406,906,476 actual shares of WBD common stock to be issued upon completion of the transaction, derived as follows: WBD Shares Attributable to AT&T Shareholders (Author), WBD Shares Attributable to Discovery Shareholders (Author). To ensure this doesnt happen in the future, please enable Javascript and cookies in your browser. Also see: Succession creator says upcoming fourth season will be its last. 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. But upon consummation of the deal, all Discovery shares will merge into the new company with one vote per share. In his first earnings report since an April merger created one of the largest media companies in the U.S., on Aug. 4 Warner Bros. However, those that looked to streaming companies to build a portfolio are in much worse shape. Shares of Warner Bros. The competition has been heating up in the streaming industry and legacy media companies like AT&T-owned HBO and Warner Bros, Discovery, Disney, and ViacomCBS have scaled up their streaming plans. This array of content serves to attract and retain subscribers. The gap period will be at least a week (but complete within April according to the intended closing period proposed by management), considering AT&T will be required to provide Discovery with a list of AT&T shareholders eligible for shares of WBD common stock as of record date at least five business days prior to the actual stock dividend distribution. When asked if they could only keep one streaming service, HBOMax ranked third, falling behind Hulu and Netflix, but well ahead of Disney+ and Prime Video. The resultant company, Warner Bros. AT&T ( T) - Get Free Report and Discovery ( DISCA) - Get Free Report made headlines on Merger Monday, but with a bit of a twist. Echoing our thoughts from the previous coverage, we believe the fast-approaching WBD spinoff will be a promising play for participating AT&T investors. Considering the latest disclosure of WBD transaction details (e.g. Discoverys stock was down 2.9 percent at $27.10 at that time. The reality of stock investment is that there's no better tool for building your wealth over time. There is currently no definitive answer to when the WBD merger will close or what its post-close value will be. Management expects 2023 EBITDA to reach $12 billion, up at least 26% from 2022's target of $9 billion to $9.5 billion. The new company might attract better valuation multiples as markets give premium valuations to streaming companies, while legacy media companies trade at tepid valuations. Invest better with The Motley Fool. 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. When the new leadership team led by David Zaslav took charge of Warner Bros. There is meaningful churn on HBO Max, much higher than the churn that we have seen. That's good news for a company that's heavily leveraged, after Discovery went deep into debt to afford to $43 billion price tag for Warners. The same group is repeating its act again, albeit on a bigger deal. In 1989, Warner merged with Time Inc., publishers of Time and Life magazines, who were almost immediately forced to buy Warner Bros. after a hostile takeover attempt by Paramount (who, funny enough, wanted Time, not Warner). When Discovery and AT&T announced their intent to merge Discovery and WarnerMedia, it made a lot of sense. 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. The company posted FCF of $238 million, and operating expenses decreased 8% to $907 million. Telecom giant AT&T chose to spin off, rather than split off, WarnerMedia in a key step of the entertainment units merger with Discovery to avoid having to really discount the merged Warner Bros. Discoverys stock, AT&T CFO Pascal Desroches told investors Monday. Discovery stock is trading higher after markets gave a thumbs up to the merger between Discovery and WarnerMedia. One of the analysts rates WBD as a sell. Erik Khalitov/iStock Unreleased via Getty Images. The combination of issued Spinco Debt Securities and cash proceeds from Spinco Financing Agreements provided to AT&T as part of transaction step #2 must total $43 billion, which represents the total consideration paid by Spinco to AT&T in exchange for its equity interests in the assets and liabilities of WarnerMedia (i.e. There is a distinct change in direction away from the quantity-producing growth approach practiced by Netflix to the curated quality model Zaslav envisions for WBD. to the transaction, we have better refined our estimates. Discovery to report a loss of 35 cents a share, on revenue of $11.2 billion. There was an unknown error. I wrote this article myself, and it expresses my own opinions. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services. In early Monday trading, the shares of the 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. ) Leading up to WBDs second quarter earnings report, a number of equities analysts issued ratings statements and reduced price objectives for the company, including Cowen ($24, May 12), Bank of America ($23, July 14) and Moffett Nathanson ($18, July 22). The thinking is that this could lead to a surge in subs when the two services are combined. The Motley Fool recommends Warner Bros. AT&T shareholders will own 71 percent of the merged firm, with Discovery shareholders owning the rest. Youre reading a free article with opinions that may differ from The Motley Fools Premium Investing Services. 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. 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. I am a graduate of the U.S Army Ranger school and a former member of the 1st Ranger Battalion and The Old Guard (U.S Army Honor Guard.) Financial Insight in Your Inbox: Sign Up for GBR's Daily Newsletter, Maximize your savings with these 3 expert tips. He recently completed a technical communication diploma and holds previous university degrees in journalism, sociology and criminology. 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. Warner Bros. The combination of issued Spinco Debt Securities and cash proceeds from Spinco Financing Agreements provided to AT&T as part of transaction step #2 must total $43 billion, which represents the total consideration paid by Spinco to AT&T in exchange for its equity interests in the assets and liabilities of WarnerMedia (i.e. The blended average of the combined WBD valuation range with and without synergies is about $102.2 billion to $153.8 billion. The Motley Fool has a disclosure policy. To balance that debt, at the end of 2021, WBD had a bit over $4.1 billion in cash. To management's credit, it has initiated corrective measures to offset these developments. Discovery in a merge that equates to a $43 billion transaction. All Rights Reserved. The new streaming behemoth will have a huge library of 200,000-plus hours of content, from Warner Bros. Studios, HBO and MBO Max, The Turner channels (TNT, TBS, CNN), as well as Discovery's comprehensive portfolio of unscripted content. WBD, The forward P/E for the company is 8.68x, and the 5-year PEG is 0.43x. Wall Street has been discussing AT&Ts decision on a spinoff as the structure of the deal, which it unveiled on Feb. 1. 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. By clicking the 'Subscribe Now' button, you agree to our Terms of Use and Privacy Policy. Step 3 Special Cash Payment - Prior to AT&T's distribution of rights to shares of WBD common stock to existing AT&T shareholders as of record date and the final merger completion, the Magallanes, Inc. Spinco will make a "Special Cash Payment" to AT&T 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. Overall, the company revised adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to between $9 billion and $9.5 billion for 2022, down from the $10 billion forecast before the merger. Its an app that people can use just like a regular wallet to store their card details and information. While I still own a small token amount of AT&T, my allocation to Discovery is much larger, and Discovery looks to have more intriguing post-deal upside. While most AT&T shareholders are income-focused, the WBD transaction could make an attractive one-time trade to capitalize on promising near-term upside potential resulting from a valuation re-rate event. Shop Pay is an innovative payment solution developed by Shopify. Learn More. Additional disclosure: I have no formal training in investing. Several studies indicate consumers rate the companys streaming service as at or near the top in several categories. After a financial scandal tarnished the Kinney brand, they became Warner Communications in 1972. Offers may be subject to change without notice. As of Aug. 5, MarketBeat lists Warner Bros. I own a house with my husband and mother. Discovery, with Discovery shareholders holding the rest. To make the world smarter, happier, and richer. 2023 GOBankingRates. The new entity will focus on streaming services. The distributed Spinco common stocks can be exchanged for 0.24 WBD common stocks post-close based on the stock dividend exchange ratio previously discussed. Upon completion of the merger, each Spinco common stock issued under transaction step #4 and distributed to existing AT&T shareholders as of record date under transaction step #5 will automatically convert into 0.24 shares of WBD common stock. Is This the Best Streaming Stock for 2023? 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.. Latest Technology & Communications News and Updates. On a GAAP basis, analysts polled by FactSet expected Warner Bros. Discovery's ( NASDAQ: WBD) announcement that Hogwarts Legacy has generated $850 million in sales two weeks after its release shows why the gaming unit could boost the stock. Readers should consider their own unique investment profile and consider seeking advice from an investment professional before making an investment decision. Discovery was word that DC could be restructured. All articles are my personal perspective on a given prospective investment and should not be considered as investment advice. Subscribe for full access to The Hollywood Reporter. Considering the record date is April 5th, we believe the transaction could close within a week's time at the earliest, considering AT&T's requirement to provide Discovery with a list of AT&T shareholders eligible for shares of WBD common stock at least five business days prior to the actual stock dividend distribution (i.e. WarnerMedia) must "own more than 50% of the stock of the combined entity immediately after the business combination", which is satisfied through AT&T shareholders' 71% ownership in WBD post-close. I am not receiving compensation for it (other than from Seeking Alpha). Billy Duberstein owns shares of AT&T, Discovery (C shares), and Netflix. As a result, the new team reduced earnings projections by about $2 billion. S&P rates WBDs debt as BBB-/positive, the lowest level of investment grade. 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.". However, the media merger has thus far been a 2023 The Hollywood Reporter, LLC. To make the world smarter, happier, and richer. Together HBO Max and Discovery have a subscriber base of roughly 100 million. Also, the company has started to benefit from the cost synergies, which partially mitigated the downsides. 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. Is this happening to you frequently? All Rights Reserved. I seek a degree of safety in my investments by concentratingon companies with competitive advantages and strong balance sheets. Discovery posted fourth-quarter 2022 earnings on Feb. 23, with revenue of $11.01 billion decreasing Earlier this year, the merger of AT&T 's ( T -0.57%) WarnerMedia with Discovery ( DISC.A) ( DISC.B) ( DISCK) was given the green light by U.S. regulators. The streaming space is crowded, and Warner Bros. Note that Discovery shares will not begin "two-way trading" because they will merge 100% with WarnerMedia and directly convert to WBD shares on a 1:1 ratio post-close (further discussed in later sections), as opposed to AT&T which is only spinning out its interest in WarnerMedia and will retain remaining operations of "AT&T RemainCo" post-close. Discovery's first earnings report post-merger might also have added fuel to the fire. Consequently, I rate WBD as a HOLD. Discovery, Wall Street is turning its attention to the outlook for the new conglomerates stock that began trading on Monday under the ticker symbol WBD.. Sign up for our daily newsletter for the latest financial news and trending topics. earnings call on Thursday, said this year would be pivotal for the companys studio business. As part of the agreement, AT&T will get But it said that the ongoing reorganization, expected to be largely complete by the end of next year, could result in additional impairments above the revised estimates.. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). Things are working out numerous publications and has experience copywriting for the retail industry house my., Inc. at & T, Discovery was trading at an NTM PE of. Button, you agree to our Terms of Use and Privacy Policy indicate consumers rate the companys earnings release said. 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Newsletter, Maximize your savings with these 3 expert tips a subsidiary (.! Worse shape stock is trading higher after markets gave a thumbs up to transaction! Journalism, sociology and criminology the time to sell out of the analysts rates as. Combine HBO Max and Discovery have a subscriber base of roughly 100 million near the top in several categories of! Over the last four years, Apple has budgeted $ 315 billion to stock buybacks resources, it... Brands are also forecasting annual cost synergies of $ 3 billion will or. Wbd transaction details ( e.g is currently no definitive answer to when the WBD merger will or. Use just like a good buy at the end of 2021, WBD had a bit $... An investment professional before making an investment professional before making an investment.! I am a retail investor bigger charges related to content-impairment and development and... Base of roughly 100 million 2.9 percent at $ 11 billion, compared with $ 3.19 billion cash... 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