WarnerMedia) must "own more than 50% of the stock of the combined entity immediately after the business combination", which is satisfied through AT&T shareholders' 71% ownership in WBD post-close. He recently completed a technical communication diploma and holds previous university degrees in journalism, sociology and criminology. If you Jakub Porzycki / NurPhoto / Shutterstock.com. The stock could be a long-term winner based on its the strong growth potential in the streaming industry. However, just because it's probably the right move doesn't mean AT&T shareholders should be overjoyed. Prior to WBDs quarterly report announcement, Barrons reported that analysts at Goldman Sachs reinstated a buy rating and price target of $22 on Warner Bros. The European Commission, the executive body of the European Union, had approved the deal in December. I am not receiving compensation for it (other than from Seeking Alpha). Last week, AT&T confirmed April 5th at market close as the record date for the stock dividend related to the WarnerMedia spinoff. The new company might attract better valuation multiples as markets give premium valuations to streaming companies, while legacy media companies trade at tepid valuations. Subscribe for full access to The Hollywood Reporter. Is this happening to you frequently? We could see some more consolidation in the streaming industry as the smaller players combine their resources to take on industry heavyweight Netflix. An SEC filing last March, just prior to the merger, revealed that Discovery forecasts revenue from its U.S. linear TV business will decline by 4% per annum through 2025, while expenses are expected to accelerate. That same study revealed that when questioned regarding their level of satisfaction among SVOD services, HBOMax received the highest score. NEW YORK and DALLAS, April 8, 2022 Today Discovery, Inc. and AT&T Inc. * ( NYSE:T) announced that they have closed their transaction to combine the My sister has always struggled with money and drugs. Discovery to report a loss of 35 cents a share, on revenue of $11.2 billion. In a filing in December, Warner Bros. WBD was trading at $24.88 before markets closed for the holiday weekend. There is no doubt that WBD will possess a formidable content portfolio. WBD projects $20 billion in content spend in 2022. An SEC filing last March, just prior to the merger, revealed that Discovery forecasts revenue from its U.S. linear TV business will decline by 4% per annum through In a race to create content, WBD is at a distinct disadvantage in terms of its balance sheet. As discussed in earlier sections, management expects the transaction to close in April. Under the terms of the deal, WarnerMedia retained $43 billion in debt. Please. After combing through the additional information recently disclosed in AT&T's 652-page 8K filing pertaining to the transaction, we have better refined our estimates. I am a graduate of the U.S Army Ranger school and a former member of the 1st Ranger Battalion and The Old Guard (U.S Army Honor Guard.) See: 9 Bills You Should Never Put on AutopayFind: 7 Things You Should Never Do When Planning For Retirement. Instead of splitting, AT&T's WarnerMedia will be spinning-off and becoming Warner Bros. Also, the company has started to benefit from the cost synergies, which partially mitigated the downsides. However, both stocks will be attempting to catch up to well-heeled competition: AT&T in connectivity, and Discovery-plus-WarnerMedia in the streaming wars. Discovery ended last week with their stock up 3%, following the successful acquisition of AT&T's WarnerMedia subsidiary by Discovery. Discovery Inc. on Thursday tried to pitch 2023 as an expansion year one during which the media powerhouses studios will crank out more movies and try to ride the early success of its Hogwarts Legacy videogame. Ahead of the fourth-quarter earnings, some analysts said the results would present an opportunity for management to reframe the companys path forward. The idea is that Warners has not been fully capitalizing on the brand's potential. The reality of stock investment is that there's no better tool for building your wealth over time. Considering the intense competition in this space, I believe caution at this stage is warranted. Discovery as a consensus (moderate) buy with an analyst price target of $24.79. Unsurprisingly, some of the remaining shareholders -- those who held onto the shares after the initial post-merger drop off -- might have been upset by these adverse developments and joined the selling rally. On 7.14 billion current shares, that's about $1.18 per share, just a little more than half the $2.18 payout today. All AT&T shareholders on record as of April 5th at market close will be eligible for 0.24 WBD shares for each share of AT&T share owned. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. So why did a spinoff of WarnerMedia make sense as a key step in the combination? As of Aug. 5, MarketBeat lists Warner Bros. Invest better with The Motley Fool. The merger also benefited AT&T's share prices, although not quite as much; most of the money from the acquisition is going to go into clearing out some of the telecom giant's debt in the coming months. It's a busy time for Warner, who besides the Discovery merger are also reportedly in the market for a buyer for The CW, a network they co-own with Paramount, the parent company of CBS (and ComicBook.com). However, Warner Bros. Discover: 15 Cheap, Beautiful Places To RetireCash App Borrow: How To Borrow Money on Cash App. Moreover, the merger resulted in WBD assuming a great deal of debt. AT&T shareholders are set to receive an estimated 0.24 share in the new company for each AT&T share held. Zaslav hasnt been shy in making changes that align with the Warner Bros. At the time This array of content serves to attract and retain subscribers. - April 18, 2022 08:39 am EDT. 2023 GOBankingRates. Bret Kenwell. When you buy stock, you're essentially buying a tiny piece of the company it represents. Based on 14 ratings, nine analysts had WBD stock as a moderate buy, five rated it as a hold, and only one appraiser had the company as a sell. S&P rates WBDs debt as BBB-/positive, the lowest level of investment grade. Here's How Much You'd Be Worth Now if You Invested in Walmart in 2013, 5 Stocks With Major Passive Income Potential, How the Stock Market Performed Under Each President. Copyright 2023 ComicBook.com. A number of HBO exclusive movies have quietly disappeared from the platform. We feel really good about where we are.. Likewise, it's possible that Discovery had plenty of shareholders who didn't believe in the vision of a combined company and they could have sold their shares. Price as of February 28, 2023, 4:00 p.m. Copyright 2023 Market Realist. Desroches also said on Monday that Stankey deserves enormous credit for the transformation of the company over his term so far as CEO, which has not even been two years. At the end of 2021, the pro forma debt for WBD was over $56 billion. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services. The approximate 1,709 million shares of WBD common stock attributable to AT&T shareholders post-close is also validated based on the 0.24-to-1 WBD share distribution ratio for each AT&T share outstanding computed as follows: The 698 million Discovery shares outstanding on a fully diluted basis is computed as follows: Together, shares of WBD common stock allocated to AT&T and Discovery shareholders will total approximately 2,407 billion units as disclosed per AT&T's latest 8K filling. Earlier this year, the merger of AT&T 's ( T -0.57%) WarnerMedia with Discovery ( DISC.A) ( DISC.B) ( DISCK) was given the green light by U.S. regulators. In the process of merging AT&T at 71% and Discovery ended last week with their stock up 3%, following the successful acquisition of AT&T's WarnerMedia subsidiary by Discovery. Readers should consider their own unique investment profile and consider seeking advice from an investment professional before making an investment decision. It's worth noting that these forecasts were before Discoverys merger announcement. Madonna Breaks Silence on Death of Brother Anthony Ciccone: You Planted Many Important Seeds, Paramount CFO: Streaming Content Spending Could Come in Below $6B Target In 2024, BBC Journalism Union Members Vote in Favor of Strike. Discovery stock is trading higher after markets gave a thumbs up to the merger between Discovery and WarnerMedia. I wrote this article myself, and it expresses my own opinions. That It had been up as much as 9% in morning trading but has been in a After the next few quarters, investors will have a better sense of how things are playing out and whether the stock is one to hold onto. The Motley Fool recommends Discovery (C shares). Discovery has generally executed well through the 2018 Scripps Networks Interactive acquisition, and Discovery CEO David Zaslav will become CEO of the new combined company, which is likely a telling move. By Russ Burlingame The company previously expected $3 billion in annual run-rate synergies from the merger, but during the last earnings call, CFO Wiedenfels stated the $3 billion target might be conservative. Discovery Makes a Dramatic Strategic Shift, Up 57% and Climbing, This Stock Is Still a Bargain Buy in 2023. WarnerMedias operating income declined 35% year-over-year. Discovery. I seek a degree of safety in my investments by. After a financial scandal tarnished the Kinney brand, they became Warner Communications in 1972. Discovery merger, AT&T and Discovery Communications shareholders have decisions to make. takes the proverbial cake, with a stock price that plummeted over 65%. With the 5G transition in full swing, the company can't afford to be distracted with the streaming media wars, paying down debt, and maintaining the dividend all at once. The transaction will take place over seven detailed steps, and will likely close within the next two weeks, consistent with the transaction plan stipulated in the March 28th 8K filing as well as management's intention to close the deal within April. The management team has plenty of experience executing mergers. Revenue came in at $11 billion, compared with $3.19 billion in the prior-year quarter. Discovery stock at a time when those shares dont fully reflect the value that we see long-term for the combined company.. pertaining to the WarnerMedia spinoff, the telecom giant also submitted a, to the SEC, covering every "nitty-gritty" detail from pro-forma historical WarnerMedia statement of operations that were not previously available, all the way down to key terms of the merger agreement with. ) While Discovery is adding 100% of its business into the new combined company, its shareholders will receive 29% of the new entity's shares, according to the merger presentation. WarnerMedias domestic linear TV revenue is projected to decline by 2% annually through 2025. Step 4 Issuance of Spinco Common Stock - Prior to AT&T's distribution of rights to shares of WBD common stock to existing AT&T shareholders as of record date, the Magallanes, Inc. Spinco will issue to AT&T a number of shares equivalent to total AT&T shares outstanding, which will later be "exchanged for shares of WBD common stock to be issued to [Spinco shareholders]". Please note that I am in the process of planning a subscription service with Seeking Alpha's Marketplace. I wrote this article myself, and it expresses my own opinions. Consequently, there could be significant overseas subscribers added. The Motley Fool recommends Warner Bros. More importantly, we believe 4Q is an opportunity for management to turn the page to 2023 and reset the narrative, BofA analysts said in a note last month. In a research note to investors, Feldman said that the merged Warner Bros. Price as of February 28, 2023, 4:00 p.m. Discovery stock is trading higher after markets gave a thumbs up to the merger between Discovery and WarnerMedia. *Average returns of all recommendations since inception. If you have an ad-blocker enabled you may be blocked from proceeding. WBDs forward P/E and 5-year PEG ratio, if accurate, indicate the stock is trading at a bargain. All articles are my personal perspective on a given prospective investment and should not be considered as investment advice. WBDWV Trading - AT&T shareholders who wish to dispose of their right to shares of WBD common stock post-close between April 4th and the WBD transaction completion date can engage in "WBDWV Trading". Magallane, Inc. is actually the "Spinco" subsidiary, wholly owned by AT&T, created specifically for the spinoff of its WarnerMedia assets. Revenue from U.S. WBD quickly axed CNN+ shortly after the April merger (although some of CNNs programming can be found on Discovery) and just this week confirmed that two films slated for an HBO Max-only release the anticipated Batgirl and the animated Scoob! I have no business relationship with any company whose stock is mentioned in this article. Looking for a helping hand in the market? These offers do not represent all available deposit, investment, loan or credit products. I have no business relationship with any company whose stock is mentioned in this article. Management projects the combined company will generate $52 billion in revenue. As part of the agreement, AT&T will get $43 billion in a mix of debt securities, cash, and WarnerMedias retention of certain debt. Lawrence Nga has no position in any of the stocks mentioned. Market Realist is a registered trademark. However, the media merger has thus far been a All Rights Reserved. The new company will be able to compete in the streaming industry. Discovery (WBD -2.01%). Since I require a discount in the share valuations of my investments, my ratings are generally very conservative. Warner Bros. In other words, if an AT&T shareholder decides to sell an AT&T share under Regular Way Trading between April 4th and the WBD transaction completion date, they will be relinquishing their rights to both AT&T and WBD immediately. Discovery stock. I could be characterized as a safety first investor. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. And many AT&T investors might have decided to sell quickly for reasons not totally related to how well the new business will do. Stock Market Holidays 2023: Is the Stock Market Open Today? With a loss of 6% in 2022, Paramount Global (PARA) stands out as the winner, so to speak, among this bunch. Controlling interest of the studio was sold to Seven Arts Productions in 1966, but Jack Warner, still managing the studio, had a confrontational relationship with them and by 1969, Seven Arts sold Warner to Kinney National Company. Also see: Succession creator says upcoming fourth season will be its last. If you want full access to our Model Portfolio and all our current Top Picks, feel free to join us for a 2-week free trial at High Dividend Opportunities. We expect that Zaslav will use his experience to help Warner Bros. Essentially, the estimated transaction value considers the closing price of $25.37 per share for Discovery Series A common stock as of March 9th as a proxy for the WBD IPO price (recall that one Discovery Series A common stock is exchangeable for one WBD common stock post-close as discussed in earlier sections). distribution of Spinco common stock to eligible AT&T shareholders as of record date), which occurs prior to completion of the WBD merger. David has covered a wide variety of financial and lifestyle topics for numerous publications and has experience copywriting for the retail industry. The merger deal will see AT&T spin off WarnerMedia, to be merged with Discovery. Since its creation (from the merger of Discovery and WarnerMedia) earlier this year, the stock has gone nowhere but down. At least both companies won't be distracted with an adjacent industry anymore. However, those that looked to streaming companies to build a portfolio are in much worse shape. There is a distinct change in direction away from the quantity-producing growth approach practiced by Netflix to the curated quality model Zaslav envisions for WBD. Several studies indicate consumers rate the companys streaming service as at or near the top in several categories. On Feb. 24, 2023, Apple (NASDAQ: AAPL) stock opened at a price of about $147 per As you approach retirement, you generally want to dial down the risk profile of your portfolio to protect your nest egg from unrecoverable losses. My valuation requirements, combined with the high quality companies that I often highlight mean many stocks I rate as a hold perform well over the long term. Please. With over 40 individual picks yielding +7%, you can supercharge your retirement portfolio right away. The spinoff and dividend cut is probably the right long-term move for AT&T, as it will offload some $43 billion in debt to the new WarnerMedia company. Discovery CEO David Zaslav will run the merged giant, with Discovery CFO Gunnar Wiedenfels serving as the new companys CFO. Looking ahead within the studio, 2023 will be a pivotal year, particularly behind our larger and broader release slate at both Warner Bros. Pictures and at DC, not to mention a wonderful start with Hogwarts Legacy on the games side, he said. Management also emphasized that the company will take a circumspect approach to content spend. do not materially differ from the assumptions applied in our previous computation of estimated upside potential in WBD attributable to AT&T shareholders, we have not made any subsequent edits. The executive also told the Deutsche Bank Media, Internet & Telecom Conference in Palm Beach, Florida, that AT&Ts stock should be appealing to investors after the WarnerMedia deal as the company is paying dividends, targeting earnings growth and is attractively priced. Chief Executive David Zaslav said the company which oversees TV channels and streaming platforms like HBO, HBO Max, Discovery and Discovery+, DC Comics and some videogames would more than double the output from its studio segment this year. On a GAAP basis, analysts polled by FactSet expected Warner Bros. Zaslav said the game had already brought in more than $850 million in retail sales, with more on the way as the game hits more platforms. Discovery posted fourth-quarter 2022 earnings on Feb. 23, with revenue of $11.01 billion decreasing Discovery stock traded down more than 4% in early after-hours trading Thursday after fourth-quarter revenue badly missed analyst estimates.. Fourth-quarter revenue came in at $11.1 billion With the WarnerMedia spinoff fast approaching, AT&T (NYSE:T) has uploaded a series of press releases last week detailing how the transaction will take place. Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services. Discovery's Stock, 2 Growth Stocks That Can Turn $250,000 Into $1 Million by 2030, Billionaire Investor Bill Ackman Is Raking In $97 Million In Annual Dividend Income From These 2 Stocks, 1 Bargain-Basement Warren Buffett Stock Down 78% to Buy Before It Starts Soaring, 3 No-Brainer Stocks to Buy With $50 Right Now, Join Over Half a Million Premium Members And Get More In-Depth Stock Guidance and Research, Motley Fool Issues Rare All In Buy Alert, Copyright, Trademark and Patent Information. Will see at & T shareholders should be overjoyed consolidation in the streaming industry own opinions looked streaming! Not receiving compensation for it ( other than from Seeking Alpha ) this space, believe! 2021, the lowest level of satisfaction among SVOD services, HBOMax received the highest score a Bargain in... Emphasized that the merged giant, with a stock price that plummeted over 65 % to the deal! Price as of February 28, 2023, 4:00 p.m but down not receiving compensation for it ( than. 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