AT&T’s (NYSE:T) merger-spinoff is now complete, with Warner Bros. Discovery (NASDAQ:WBD) trading as its own entity. Investors are hoping that this decision ends up creating value between the two entities, as it was clear that the media unit — now WBD stock — was undervalued compared to its peers.
WBD’s current media assets include Discovery Channel and Warner Bros. Entertainment, along with HBO and HBO Max, CNN, TNT, TBS and others.
Investors were growing frustrated with the prior arrangement. While AT&T’s legacy business did not help matters, investors took issue with the market’s refusal to value AT&T’s growing streaming business — HBO Max — with any sort of premium. In fact, this unit was trading at a notable discount when we look at other streaming platforms like Netflix (NASDAQ:NFLX) and Disney (NYSE:DIS).
Thus, AT&T finally opted to separate the businesses. Now the question becomes, how much value could be unlocked? Since the spinoff on April 11, there have been at least four bullish analyst takes. Some include:
- Bank of America (NYSE:BAC): Buy Rating, $45 Price Target
- Deutsche Bank (NYSE:DB): Buy Rating, $48 Price Target
- Atlantic Equities: Buy Rating $40 Price Target
- Evercore ISI (NYSE:EVR): Buy Rating, $40 Price Target
Even at the lowest price target, this would imply 70% upside for WBD stock. However, the highest target implies just over 100% upside from current levels. Clearly, the analysts are seeing upside in the stock.
Investors are hoping some of that value will be unlocked when Netflix reports earnings tonight. While the two are competitors in regards to streaming, the hope is that a strong report from Netflix would act as a bullish catalyst for WBD stock. That said, Netflix stock has not been doing very well either. Shares are currently down 50% from the all-time high and are down 42% so far this year.
Depending on the reaction to Netflix’s report, it may decide the pre-earnings momentum for Warner Bros. Discovery. The company is scheduled to report its quarterly results before the open on April 26.
On the date of publication, Bret Kenwell did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
