On December 12, shares of media giant Warner Bros. Discovery NASDAQ: WBD grew by more than 15%. The huge success comes thanks to the announcement that the firm will be restructuring its business, which offers several key potential benefits. Wall Street analysts on average raised their price targets, but as of the close of trading on December 19, the stock had given up all those gains and more.
So, does the recent drop in Warner Bros. stock prices signal… about the possibility of purchasing? Let’s break down the details and potential benefits of the restructuring and see how they might be affected by the new Trump administration.
Restructuring the UBD: separating the engine of growth from the lagging segment
Opening of Warner Bros. Today
Warner Bros. Discovery
(As of 5:45 p.m. ET)
- 52 week range
- $6.64
▼
$12.70
- Target price
- $11.44
Warner Bros. restructuring will split the company into two operating divisions. Previously, the company’s three operating segments were networks, studios and direct-to-consumer. Now Studios and Direct-to-Consumer are merging into one division called Streaming and Studios. The networks segment will develop as global linear networks.
The Streaming and Studios division will include the company’s Max and Discovery+ streaming platforms. The firm will now manage the studio’s operations, which include film and TV production and streaming. This reflects the company’s desire to better align content production with streaming and become its primary growth driver.
The Global Linear Networks unit will retain control of the company’s traditional television channels, such as TNT, CNN and TBS. The focus will be on maximizing profitability and generating cash. The long-term plan is unclear, but the Global Linear Networks division could become a separate corporate entity. This is what Comcast NASDAQ: CMCSA recently did with my cable networks. If this happens, Warner Bros. there will be an easier way to sell the Global Linear Networks division.
A complete separation of these businesses is what investors are really hoping for. This would mean that Warner Bros. shares. Discovery will only reflect the financial results of its Streaming and Studio divisions. It will also allow markets to more easily value the growth-oriented part of the business, decluttering the struggling linear TV division, which is more than $40 billion in debt and had to take on more than $9 billion in impairment charges in 2024. In this regard, it can be argued that Warner Bros. doesn’t get enough recognition for its streaming services, which have 111 million subscribers.
The new presidential administration can help the UBI strategy
Warner Bros. is a key part of this strategy.” Hopefully the mergers and acquisitions (M&A) market will be strong under the Trump administration as it seeks to sell off some of its businesses. Bain and Company described merger and acquisition activity in 2024 as “average.” However, it has recovered since 2023. Corporate mergers and acquisitions activity, likely the type Warner Bros. is targeting, rose 12%. Valuations of strategic mergers and acquisitions have reached historically low levels and have lagged significantly behind public market valuations.
Data from PricewaterhouseCoopers shows that mergers and acquisitions in the media and entertainment industry were very weak in the fourth quarter of 2024. The firm expects a “robust” M&A market in 2025, citing changes the Trump administration is making to the chairmen of key regulators in support of that. Trump has appointed Brendan Carr as chairman of the Federal Communications Commission (FCC) and is attempting to remove Federal Trade Commission (FTC) Chairwoman Lina Khan, both moves that signal a “deregulatory agenda.”
Khan has established herself as one of the staunchest opponents of large-scale consolidations in recent memory. However, she appears to be fighting attempts to force her out. Khan did not resign voluntarily, unlike most other Biden administration appointees, and if she does not resign, she could have a strong influence on the agency’s actions for months or longer.
VBD shares show solid growth potential
Warner Bros stock forecast Discovery for today
$11.44
Growth potential 9.58%Hold
Based on ratings from 22 analysts
| High forecast | US$18.00 |
|---|---|
| Average forecast | $11.44 |
| Low forecast | $7.00 |
Warner Bros stock forecast details. Discovery
Seven analysts’ price targets were updated by an average of 18% following the restructuring announcement. However, as of December 19, the stock was down 16% from its December 12 closing price. Additionally, the average of these new price targets suggests an upside of 27% from the December 19 closing price.
This is evidence of some mispricing, indicating opportunity. Warner Bros. appears to be in a better position if it divests itself of its linear television business. These data indicate that the likelihood of this happening in 2025 will increase. However, Lina Han may intervene in the situation for a while.
Before considering Warner Bros. Discovery, you need to hear this.
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