I am a retail investor, with no formal training in investing. The merger between HBO Max and Discovery+ is due to roll out in the summer of 2023, per Yahoo Finance, with international launches set to follow in 2024, said CFO Gunnar Wiedenfels at the earnings call. AT&T is also still behind competitors in 5G deployment, and is up against stiff competition in the fiber broadband space. Discovery ("WBD"). The company posted a 5% growth in U.S. advertising and an 11% increase in distribution revenue due to Discovery+. Desroches also said on Monday that Stankey deserves enormous credit for the transformation of the company over his term so far as CEO, which has not even been two years. 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. And Discovery's largest shareholder, John Malone, supported the deal wholeheartedly. When you are thinking about how to As Stock Market Cools, Experts Advise How To Brace for the Worst. ET. An SEC filing last March, just prior to the merger, revealed that Discovery forecasts revenue from its U.S. linear TV business will decline by 4% per annum through By comparison, the S&P 500 index The new entity will focus on streaming services. The stock could be a long-term winner based on its the strong growth potential in the streaming industry. The service will allow you to follow my model portfolio, interact with me directly, and participate in chat rooms with other subscribers. In addition, Discovery didn't have a dividend prior to this announcement, while AT&T was a former Dividend Aristocrat that will cut its dividend in half in the wake of the deal. In early Monday trading, the shares of the 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 wrote this article myself, and it expresses my own opinions. Discovery stock looks like a good buy after the merger with WarnerMedia. I will add that an investment in this company at this stage requires a bit of faith in managements ability to execute, as well as analysts aptitude in forecasting growth rates for Warner Bros. AT&T Regular Way Trading - AT&T shareholders can engage in "Regular Way Trading" during the two-way trading period if they wish to sell "both the share of AT&T common stock and the right to receive shares of WBD common stock in the transaction". On 7.14 billion current shares, that's about $1.18 per share, just a little more than half the $2.18 payout today. The companies are also forecasting annual cost synergies of $3 billion. In February, the merger received approval from the U.S. Department of Justice, the key regulatory hurdle for the merger. 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. Discovery planned to keep Discovery+ as a standalone streaming platform, as the company weighs how to make more of its content available in a single place. Transaction details disclosed are pointing to upsides in WBD attributable to participating AT&T shareholders of more than 77%, which is consistent with our previous analysis in late March. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services. The Wall Street Journal this month reported that Warner Bros. AT&T Ex-Distribution Trading - AT&T shareholders can engage in "Ex-Distribution Trading" during the two-way trading period if they wish to only sell their right to AT&T RemainCo and retain their stock dividend pertaining to the WBD transaction. Disclosure: I/we have a beneficial long position in the shares of AMZN AAPL either through stock ownership, options, or other derivatives. 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). 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. That The European Commission, the executive body of the European Union, had approved the deal in December. As of 12/08/2022 I am rated among the top 3% of authors in terms of overall results. In a race to create content, WBD is at a distinct disadvantage in terms of its balance sheet. Copyright 2023 ComicBook.com. Invest better with The Motley Fool. Making the world smarter, happier, and richer. 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. Please disable your ad-blocker and refresh. ) By clicking the 'Subscribe Now' button, you agree to our Terms of Use and Privacy Policy. Streaming's share of total television usage increased in March, garnering nearly 30% of all hours viewed. Consequently, there could be significant overseas subscribers added. Bill Peters is a Los Angeles-based MarketWatch reporter who covers earnings. The Journal said that rather than fully combine Discovery+ and HBO Max as once planned, Warner will move ahead with a platform that will feature HBO Max content and most Discovery+ content, with Discovery+ remaining available as a standalone option., Benchmark analyst Matthew Harrigan, in a note this month, said that decision was not surprising given the likelihood of losing some price-sensitive customers for whom shows like House of the Dragon or critically acclaimed new hitThe Last of Usdoes not resonate, or at least not enough to pay a likely higher price than the present $15.99/$9.99 (with ads) for HBO Max.. Essentially, AT&T will transfer 100% of its owned WarnerMedia assets into the Magallane, Inc. Spinco prior to the completion of the transaction. WBD Transaction Structure (AT&T 8K filing, with annotations by Author. Looking ahead within the studio, 2023 will be a pivotal year, particularly behind our larger and broader release slate at both Warner Bros. Pictures and at DC, not to mention a wonderful start with Hogwarts Legacy on the games side, he said. Readers should consider this when weighing my buy/hold/sell recommendations. However, we have taken additional consideration of the valuation sensitivity analysis performed by the WBD transaction advisors, Allen & Company and J.P. Morgan, as disclosed in AT&T's most recent 8K filing dated March 28th to further gauge the upside potential in WBD post-close. That sale is being blamed for the slow pace of renewals for some of The CW's shows, including the Warner Bros.-ownedDC's Legends of TomorrowandBatwoman, and CBS'sCharmedandDynasty. 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). NFLX has a projected net debt-to-adjusted EBITDA ratio of 1.3 for 2022. All Rights Reserved. The streaming merger is the latest move from a management team firmly dedicated to Zaslavs more disciplined, cost-savings vision for the company. Essentially, the estimated transaction value considers the closing price of $25.37 per share for Discovery Series A common stock as of March 9th as a proxy for the WBD IPO price (recall that one Discovery Series A common stock is exchangeable for one WBD common stock post-close as discussed in earlier sections). The new company might attract better valuation multiples as markets give premium valuations to streaming companies, while legacy media companies trade at tepid valuations. The Motley Fool owns shares of and recommends Netflix. Stock Market Sell-Off: Is Warner Bros. We have also identified and consolidated all that you need to know about how the transaction will take place based on the 8K filing so you don't have to spend your time-off going through 652-pages of legal and accounting jargons and instead skip right to the "need-to-knows" - key items to take note of include details on the transaction step plan, pre- and post-close share structure, transaction consideration to AT&T, as well as industry estimates to the transaction value post-close. Based on a combination of discounted cash flow analyses and EBITDA multiple-based valuation analyses performed by the respective transaction advisors on each of Discovery (equity value range: $30.6 billion to $43.1 billion) and WarnerMedia (equity value range: $55.9 billion to $94.3 billion without synergies; $87.3 billion to $127.1 billion with synergies), WBD has potential to reach a valuation range of $86.5 billion to $137.4 billon without synergies, and $117.9 billion to $170.2 billion with synergies post-close. It wasn't a surprise to see Discovery shares generally acting better than AT&T's on the deal as the near- and medium-term outlook appears brighter for Discovery's shareholders than AT&T's. Latest Technology & Communications News and Updates. Revenue from U.S. Is DISCA stock a good buy after the AT&T merger news? Now, the record date is not the same as the transaction completion date. Sign up for THR news straight to your inbox every day. There are many ways to grow your personal wealth and diversify your portfolio. Apr 11, 2022 1:58 PM EDT. There is no doubt that WBD will possess a formidable content portfolio. Ahead of the Warner Bros. Discovery a Buy? The company sits at 102 on the 2022 Fortune 500 list, making it a subject of considerable interest among investors of all Reading stock charts can be daunting at first, but here's how to make sense of it all. The merger with Discovery has the above-stated benefits for AT&T, including significantly reduced debt. With the steady hand of Zaslav now in command of more world-class media assets he can now deploy internationally, Discovery has gone from a small unscripted player to a scaled global behemoth across scripted, unscripted, and news content. I have approximately 20 years experience as a retail investor. Discovery currently has 700 million shares outstanding, while 1.7 billion new shares will come to market as part of the transaction. Here is a stat that might surprise many readers: every stock listed above has underperformed the S&P 500 over the last three years by a wide margin. You can click on the 'unsubscribe' link in the email at anytime. (I update this score on at least a quarterly basis for readers.). Price as of February 28, 2023, 4:00 p.m. Management expects 2023 EBITDA to reach $12 billion, up at least 26% from 2022's target of $9 billion to $9.5 billion. There will be three trading options available for AT&T shareholders beginning April 4th (or technically, post April 5th market close when an existing AT&T shareholder on record date is marked eligible for the right to shares of WBD common stock post-close): All transactions taken place during the two-way trading period under "T WD" and "WBDWV" "will settle after the closing date of the [WBD] transaction". Discovery have tumbled 45.2% over the past 12 months. 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