Warner Bros. Discovery's Forward-Thinking Strategy: Analysts Highlight Promising Outlook with 26% Upside Potential

Truist Securities initiated the coverage on Warner Bros. Discovery Inc WBD at a price target of $19.
The analyst Matthew Thorton writes that the company's strategy to relaunch HBO Max (2023-2024) with Discovery+ content should boost average revenue per user (ARPU) and subscription renewals.
He sees DC Studios as pursuing the Marvel playbook and opportunistically narrowing the significant IP exploitation gap, thereby unlocking growth opportunities.
Truist's proprietary survey shows HBO Max ranks 4th on 'most used' applications after Netflix, PV, and Hulu.
The analyst expects net debt-to-adjusted EBITDA to improve to <4x,<3x, and >2x in 2023, 2024, and 2025, respectively. These estimates reflect projected merger synergies (another $2 billion and $1 billion in 2023 and 2024) and improved revenues and FCF conversion rate.
The analyst sees a lower bottom-line impact from fluctuations in foreign currency and interest rate changes.
WBD trades at 6x 2024 EV/adjusted EBITDA, 13x 2024 P/adjusted EPS and 9x 2024 P/FCF multiples.
The analyst's base case price target of $19 reflects a 7x targeted EV/adjusted EBITDA multiple and has a 26% upside potential to adjusted EBITDA at $12.9 billion vs. consensus of $12.4 billion in 2024.
Price Action: WBD shares are trading higher by 1% at $15.26 on the last check Monday.

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