Discovery Stock Leaps 17% After Wall Street Analyst Says WarnerMedia Merger Can Yield “The Most Dynamic Global Media Company”
08.01.2022 - 01:39
/ deadline.com
Discovery shares, which have been in a funk for months, roared back to life today, jumping 17% on heavy trading volume after a validation from a veteran Wall Street analyst.
Bank of America’s Jessica Reif Ehrlich upgraded Discovery shares to a “buy” from “neutral” and rhapsodized about its potential in a note to clients. She also raised her 12-month price target to $45 from $34. The stock responded by climbing to $30.06 by the closing bell, its highest level since last July. Trading volume was nearly seven times normal levels.
On a mixed day overall for stocks, the boost for Discovery appeared to help ViacomCBS. As another TV heavyweight seen as an M&A candidate, it saw its shares rise 8% to $35.39.
Discovery and WarnerMedia are poised to combine in a $43 billion merger, forming a new entity to be led by current Discovery CEO David Zaslav. Speaking at a Citibank conference earlier this week, John Stankey indicated that the regulatory path was smooth for the deal and said it could close before the companies’ forecast of mid-2022. CNBC’s David Faber reported that his sources were telling him it could become official as soon as April.
Cost-savings and the potency of the merged company’s asset mix are the key reasons for Ehrlich’s optimism. “Under the right management—which we believe Warner Bros. Discovery has/will have—the combination of these highly complementary assets, has the potential to create a global media powerhouse driven by creative and content leadership,” the analyst wrote. “As a combined entity, we believe Warner Bros. Discovery has the potential to be the most dynamic global media company.”
The companies’ stated goal of $3 billion in cost synergies, she continued, is “highly achievable, if not conservative, given
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