Discovery Shares Rally, Wall Street Warms To Approaching WarnerMedia Deal
14.01.2022 - 01:20
/ deadline.com
Discovery stock jumped today as a formerly skeptical Wall Street is increasingly out pounding the table for the stock ahead of the David Zaslav-led company’s merger with WarnerMedia.
The shares hit $30 continuing a rally that gathered steam last week on an upgraded ‘buy’ rating from BofA Securities. Analyst Jessica Reif Cohen said then, “We believe Warner Bros. Discovery has the potential to be the most dynamic global media company.” Today, in a follow-up note titled “Stage is set and the show is about to start,” she boosted her fourth-quarter revenue, free cash flow and EPS estimates and said she’s encouraged by operational momentum heading into the merger.
Also today, UBS analyst John Hodulik anticipated a clean close to Discovery’s deal with AT&T early in the second quarter. In a note focused on the pending transaction, said he expects Discovery to rapidly de-lever after as it focuses on continued growth at HBO Max.
It’s better late than never for Discovery, as analysts and investors were slow to embrace the deal announced last April. Transformational as it was, the news did not stem the stock’s downward trajectory. Shares had already started to drop from their 52-week high near $80 in March and continued to hit a low of under $22 in mid-December. So $29.34 (where the shares ended up closing today) isn’t exactly meme stock territory, although some on Reddit noted that owning WarnerMedia doesn’t seem to be priced into Discovery shares.
BofA has a $45 price target on Discovery. Hodulik says the deal should be a catalyst for the shares.
In part, Wall Street may have had jitters about the deal closing, Those may have been allayed over the past month by a handful of headlines including unconditional clearance by the European
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