Benchmark starts beaten-down Warner Bros. Discovery stock at Buy
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Warner Bros. Discovery (NASDAQ:WBD) stock has taken a bit of a hit since it made it debut as a combination between Discovery Inc. and the spun-off WarnerMedia - but Benchmark has started coverage at a Buy, suggesting its high time to take advantage of the company's downtime.
WBD stock is up 1.8% Thursday in a mixed stock market in response. As for Benchmark's thesis, the stock has tumbled 45% since it started trading as the new entity on April 11.
That's due to "2022 streaming aversion, leverage concerns, and overall equity market recession angst affecting advertising," analyst Matthew Harrigan says.
Still, shares are set to regain footing in time, he said: "Investor perception in 2H22 should further benefit from management delineation of HBO Maxâs and Discovery+âs branding and pricing strategies as well as clarity from new pro forma financials for the reconfigured WarnerMedia and Discovery businesses." Meanwhile, new boss David Zaslav is "resolutely" focused on collapsing the former Time Warner's well-known creative and performance-assessment silos, he says.
The company's set to benefit from addressing ad-pricing discounts relative to broadcast TV, as well as ad-tech advances with the growing primacy of programmatic advertising, Harrigan says. And HBO Max and Discovery+ look "well positioned" for streaming competition: HBO Max's "consumer acquisition appeal" complementing advantages in churn and retention from Discovery+.
He's set a 2023 price target of $26 - fully implying 94% upside from here - with fair value at $35, inclusive of "full synergy" net present value.
At the box office, WBD is celebrating a win last weekend as its Elvis outgunned Top Gun: Maverick in ticket sales.