Superman And Batman Franchises To Take On Marvel's Superheroes: Warner Bros. Discovery Underlying Businesses Have Huge Upside

Benchmark analyst Matthew Harrigan reiterates a Buy rating on Warner Bros. Discovery, Inc WBD with a price target of $26.00.

The re-rating reflects cautious valuation parameters allowing headroom, especially as investors gain confidence in long-term earnings power.

Even as media companies and the equity market have taken a more rational view toward excessively streaming-centric strategies, WBD is pivoting from maiden-year restructuring initiatives toward a 2023 emphasis on relaunching and building its business.

The analyst notes that recent soft stock performance does not reflect the long-term resilience of the underlying businesses and a reasonable likelihood of achieving $4.0 billion in total merger cost savings. 

Direct to Consumer (D2C) losses should reach breakeven in 2024 with a seemingly reasonable $1 billion 2025 profit objective.

Warner Bros. is adamantly prioritizing theatrical over immediate streaming on the Max streaming service, with Blue Beetle upgraded to a theatrical release from direct-to-streaming. 

Upcoming shared universe releases after 2023 include Superman: Legacy and Batman feature The Brave and the Bold. Standalone event releases include The Batman Part Two and Joker: Folie a Deux. 

Solid superhero movie film execution is now critical with a weak $132.9 million global tally for March DC release Shazam of just $132.9 million globally following a feeble performance from rival Marvel’s Ant-Man and the Wasp: Quantumania. 

Reactions at Cinemacon yesterday after a full screening of DC Comics’ The Flash were very positive as Warner Bros. unusually screened the entire film nearly two months before its June 16 release.

Benchmark analyst Mike Hickey suggests the Cinemacon mood is that DC Comics is finally on sound footing with the new ten-year plan from co-heads James Gunn and Peter Safran.

Price Action: WBD shares closed lower by 1.56% at $12.61 on Wednesday.