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Monday, June 24, 2024

Warner Bros. Discovery downgraded at Wells Fargo on dangerous earnings setup By allskynews

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Warner Bros. Discovery (NASDAQ:) fell 3.20% to $10.28 after Wells Fargo analysts downgraded the inventory to ‘equal-weight’ from ‘chubby.’

The analysts additionally lowered their worth goal on the inventory to $12 from $16, saying their thesis has modified and so they now count on decrease earnings with a static a number of, as an alternative of deleveraging w/ a number of growth.

“Decrease earnings have been the story for the reason that merger, and the development limits future a number of growth…we now count on a flattish a number of (6xs EV/EBITDA, low-7xs incl. securitized debt),” analysts mentioned in a word to shoppers Monday.

Analysts are additionally much less favorable on M&A, noting that fairness traders have restricted tolerance for extra debt no matter strategic rationale.

Whereas acknowledging that the HBO slate is stronger in ’24 and capable of help internet provides, analysts are involved in regards to the challenges dealing with administration, which is “caught between scaling DTC and deleveraging via licensing offers.”

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“WBD epitomizes Media’s alternatives and dangers. Its DTC enterprise is underpinned by HBO – arguably the gold normal for unique sequence. Warner Bros. studio has sturdy franchises and gaming.”

“However, the Networks division is dealing with pressures from scores declines and rope slicing. With above-average leverage, it renders WBD’s a number of on the extra modest aspect of Media shares. Deleveraging/FCF may add to fairness worth, whereas secular challenges creates a number of compression threat,” analysts added.

At current, they see earnings stress as too nice to outweigh any potential positives recognized.

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