Why WarnerMedia Merger Is Turning This Discovery Communications Analyst Bullish

The merger of Discovery Communications Inc DISCA with AT&T Inc T's WarnerMedia will create a “global media powerhouse driven by creative and content leadership,” according to BofA Securities.

The Discovery Communications Analyst: Jessica Reif Ehrlich upgraded Discovery Communications from Neutral to Buy and raised the price target from $34 to $45.

The Discovery Communications Takeaways: Given the potential of the combined entity, to be named Warner Bros. Discovery, the risk-reward ratio for Discovery Communications seems “extremely favorable,” Ehrlich said in the upgrade note.

The merger is anticipated to close in the first half of 2022. “We see several areas for potential rev. and cost synergies and are bullish on the potential of a combined HBO Max/discovery+ DTC service,” the analyst wrote.

“There is also ample potential to drive healthy FCF by optimizing working capital and reducing DSOs,” she added.

DISCA Price Action: Shares of Discovery Communications were trading 16.1% higher at $29.86 midday Friday.