Warner Bros. Discovery and Paramount Gain Analyst Support as Merger Talks Intensify

Benchmark analyst Matthew Harrigan reiterated Warner Bros. Discovery Inc WBD with a Buy and a $24 price target.

Warner Bros. Discovery stock continues to trade off in an overall market rally, likely due to antipathy toward any deal with Paramount Global PARA. 

This is as the market was seemingly starting to acknowledge grudgingly, with the stock briefly up 34% year-to-date in mid-December, WBD management credibility for ~$5 billion+ in sustainable prior deal benefits while awaiting better creative execution – namely for the studio and DC. 

This coincides with a vital box office for Wonka with some apprehension over this weekend’s Aquaman and the Lost Kingdom performance – the last release inherited from prior studio management. 

Also Read: Paramount Global Weighs BET Sale Options as Byron Allen Proposes $3.5B Offer

Although any deal involving WBD and PARA is highly uncertain, including for regulatory reasons, Harrigan now runs “WarnerMount” price targets and leverage outcomes assuming 1) a light ~$3.0 billion in eventual annual synergies with a $2.0 billion NPV capture cost and 2) varying cash and new equity components. High-end synergies may be more toward $5.0 billion. 

The analyst projects a Q4 revenue of $10.35 billion.

Analyst Daniel L. Kurnos reiterated a Buy rating on Paramount with a price target of $30.

There will be no rest for the weary as the Paramount takeout hits keep coming, this time as a potential merger with WBD. 

While perhaps a more straightforward strategic combination, this outcome presents risks and hurdles involving only one or two shareholder bases and some incremental regulatory scrutiny. 

However, if executed at the company level rather than through NAI, a Warner deal offers both parties more potential upside, considering his math suggests a base case of at least $3 billion in synergies. Furthermore, rumors of a revived BET deal support the broader takeover premise and offer a more aggressive non-core asset sale strategy may finally be in place. 

Price Actions: WBD shares traded lower by 1.78% at $11.28 on the last check Friday. PARA shares traded lower by 0.52% at $14.99.