discovery stock after mergerdiscovery stock after merger

Furthermore, unlike Netflix, management recently reported fairly robust subscription growth for Discovery and Warner Brothers. In addition, Discovery didn't have a dividend prior to this announcement, while AT&T was a former Dividend Aristocrat that will cut its dividend in half in the wake of the deal. WBD projects $20 billion in content spend in 2022. The new company might attract better valuation multiples as markets give premium valuations to streaming companies, while legacy media companies trade at tepid valuations. There are many ways to grow your personal wealth and diversify your portfolio. 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). What's been going on and is now the time to sell out of the stock? Warner Bros. Discovery Makes a Dramatic Strategic Shift, Up 57% and Climbing, This Stock Is Still a Bargain Buy in 2023. Discovery reported a fourth-quarter net loss of $2.08 billion, or 86 cents a share, after a profit of $38 million, or 8 cents a share, in the same quarter in 2021. 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. NFLX has a projected net debt-to-adjusted EBITDA ratio of 1.3 for 2022. The Hollywood Reporter is a part of Penske Media Corporation. But if I take a step back here and just look at, call it, the past 15 months for WarnerMedia sort of as a carve out-group, we're looking at more than $40 billion of revenue and really virtually no free cash flow. Under the terms of the deal, which is structured as an all-stock transaction, AT&T would receive $43 billion in cash and debt with its shareholders controlling 71% of Net income for the quarter hit $456 million, with EPS of $0.69 cents. That, plus the lower dividend, will allow AT&T to focus on building out its 5G network and its fiber footprint over the next few years. There is currently no definitive answer to when the WBD merger will close or what its post-close value will be. AT&T Regular Way Trading - AT&T shareholders can engage in "Regular Way Trading" during the two-way trading period if they wish to sell "both the share of AT&T common stock and the right to receive shares of WBD common stock in the transaction". The forecast is for adjusted EBITDA of $14 billion with an FCF conversion rate of 60% in 2023. Discovery CEO David Zaslav After last years messy mega-merger, executives at Warner Bros. And given that Q1 performance and previously unplanned projects in sight, I currently estimate the WarnerMedia part of our profit baseline for 2022 will be around $500 million lower than what I had anticipated. Upon completion of the transaction, AT&T shareholders will, together, own 71% equity interest in WBD, with Discovery shareholders owning the remainder 29%. Here is a stat that might surprise many readers: every stock listed above has underperformed the S&P 500 over the last three years by a wide margin. Ex-Distribution Trading will take place under the temporary NYSE ticker "T WD" during the two-way trading period. The European Commission, the executive body of the European Union, had approved the deal in December. WBD currently trades for $18.88 a share. Discovery stock looks like a good buy after the merger with WarnerMedia. The Motley Fool has a disclosure policy. That sale is being blamed for the slow pace of renewals for some of The CW's shows, including the Warner Bros.-ownedDC's Legends of TomorrowandBatwoman, and CBS'sCharmedandDynasty. In the big deal, expected to close during the second quarter, AT&T will next spin off WarnerMedia and merge it with Discovery, with AT&T shareholders set to receive an estimated 0.24 share in the new company for each AT&T share held. Discovery, will start However, Warner Bros. 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). That The Wall Street Journal this month reported that Warner Bros. 2023 The Hollywood Reporter, LLC. Additional disclosure: I have no formal training in investing. 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. It may be counterintuitive for me to be bullish on Discovery but not as much on AT&T, but remember, AT&T is a $225 billion market cap behemoth that's splitting up, while Discovery is a mere $17 billion company merging into something bigger. 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. Overall, the company revised adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to between $9 billion and $9.5 billion for 2022, down from the $10 billion forecast before the merger. Zaslav hasnt been shy in making changes that align with the Warner Bros. It had been up as much as 9% in morning trading but has been in a Of course, the numbers behind the earnings report pertain to the former Discovery, Inc; however, management provided some important metrics related to WarnerMedia, as well as some relevant commentary. Discovery (NASDAQ: WBD) when the stock went public last April. As discussed in detail in our last coverage, AT&T will spinoff 100% of its current interest in WarnerMedia post-close. Revenue came in at $11 billion, compared with $3.19 billion in the prior-year quarter. James Gunn Reveals New Superman, Batman Movies and More, Warner Bros. I seek a degree of safety in my investments by concentratingon companies with competitive advantages and strong balance sheets. The thinking is that this could lead to a surge in subs when the two services are combined. The combination of issued Spinco Debt Securities and cash proceeds from Spinco Financing Agreements provided to AT&T as part of transaction step #2 must total $43 billion, which represents the total consideration paid by Spinco to AT&T in exchange for its equity interests in the assets and liabilities of WarnerMedia (i.e. with the stock up over 60% year to date, reversing losses from 2022 Year-to-date, Warner Bros. I'll be launching in the near future with a legacy discount for early subscribers and I'll be sharing more details as we ramp up to launch in the coming months. Since I require a discount in the share valuations of my investments, my ratings are generally very conservative. This array of content serves to attract and retain subscribers. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). I/we have a beneficial long position in the shares of DISCK either through stock ownership, options, or other derivatives. As of Aug. 5, MarketBeat lists Warner Bros. Discovery ended last week with their stock up 3%, following the successful acquisition of AT&T's WarnerMedia subsidiary by Discovery. Of that, $15 billion will be generated by direct-to-consumer services. Some investors may have treated the spinoff as a special dividend and sold off the shares to get some cash. Chief Financial Officer Gunnar Wiedenfels, during Warner Bros. Discoverys All Right Reserved. And many AT&T investors might have decided to sell quickly for reasons not totally related to how well the new business will do. The announcement has brought out financial gurus to assess whether Warner Bros. 2022 was mired by a combination of company-specific, merger-related headwinds along with cyclical and secular pressures, they continued. Last week, AT&T confirmed April 5th at market close as the record date for the stock dividend related to the WarnerMedia spinoff. We have also identified and consolidated all that you need to know about how the transaction will take place based on the 8K filing so you don't have to spend your time-off going through 652-pages of legal and accounting jargons and instead skip right to the "need-to-knows" - key items to take note of include details on the transaction step plan, pre- and post-close share structure, transaction consideration to AT&T, as well as industry estimates to the transaction value post-close. Warner Bros. Discovery merger, AT&T and Discovery Communications shareholders have decisions to make. The new streaming behemoth will have a huge library of 200,000-plus hours of content, from Warner Bros. Studios, HBO and MBO Max, The Turner channels (TNT, TBS, CNN), as well as Discovery's comprehensive portfolio of unscripted content. Bolstered by strong international results, WBD increased total revenue by 13% to $3.16 billion. Discovery to report a loss of 35 cents a share, on revenue of $11.2 billion. The company posted FCF of $238 million, and operating expenses decreased 8% to $907 million. Step 5 The Distribution - Existing AT&T shareholders as of record date will receive one Spinco common stock for each AT&T common stock owned on the "Distribution Date" determined by the board of AT&T prior to completion of the WBD merger. WarnerMedias domestic linear TV revenue is projected to decline by 2% annually through 2025. This increased its subscriber numbers to 76.8 million. AT&Ts WarnerMedia unit and Discovery Inc said on Friday that the two firms have completed the merger. $33 billion fair value attributable to WarnerMedia assets + $10 billion additional amount) funded by a combination of debt securities and cash from Spinco provided to AT&T. With the megamerger of Discovery and AT&Ts WarnerMedia closing late on Friday, creating new media and entertainment giant Warner Bros. 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 Following the merger early last month, WBD ranks as the number-three player in the U.S. video streaming business behind Netflix and Disney. Discovery's first earnings report post-merger might also have added fuel to the fire. I am not receiving compensation for it (other than from Seeking Alpha). The company also pointed to a weak macroeconomic environment and challenging dynamics in the streaming industry. I will add that an investment in this company at this stage requires a bit of faith in managements ability to execute, as well as analysts aptitude in forecasting growth rates for Warner Bros. to the transaction, we have better refined our estimates. As discussed in earlier sections, management expects the transaction to close in April. In early Monday trading, the shares of the Echoing our thoughts from the previous coverage, we believe the fast-approaching WBD spinoff will be a promising play for participating AT&T investors. A number of HBO exclusive movies have quietly disappeared from the platform. Discovery, with Discovery shareholders holding the rest. SPX, 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. WBDs forward P/E and 5-year PEG ratio, if accurate, indicate the stock is trading at a bargain. Discovery had reported 20 million subs as of Sept. 30 of 2021. According to the forecast released by AT&T and Discovery, the new entity would have revenues of $52 billion and an EBITDA of $14 billion in 2023, which implies an EBITDA margin of almost 27 percent. 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. In the process of merging AT&T at 71% and These offers do not represent all available deposit, investment, loan or credit products. The company the result of a merger last year between AT&Ts WarnerMedia and Discovery reported a fourth-quarter net loss of $2.08 billion, or 86 After working in the energy industry for 18 years, he decided to change careers in 2016 and concentrate full-time on all aspects of writing. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services. Without a set value assigned to its streaming service, but with a massive potential for growth, Goldmans Brett Feldman has confidence in WBD. Together, these adverse developments impacted Warner Bros. Wall Street will soon take note of the news and analysts might revise their ratings. 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. Please disable your ad-blocker and refresh. ) In the last quarter before the merger, AT&T reported 2.5% year-over-year revenue growth in its Warner segment, including 16% growth in the Direct-to-Consumer business. Copyright 2023 Market Realist. I am a retired law enforcement officer. The resultant company, Warner Bros. We expect that Zaslav will use his experience to help Warner Bros. Discovery planned to keep Discovery+ as a standalone streaming platform, as the company weighs how to make more of its content available in a single place. 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. However, most of the analysts rate the stock as a hold or some equivalent. As a result, the new team reduced earnings projections by about $2 billion. net asset value under U.S. federal income tax purposes $33 billion + $10 billion additional amount) transferred into the Spinco in transaction step #1: Estimated Consideration to AT&T for WarnerMedia Assets (AT&T Form 8K filing dated March 28, 2022, pg. Shop Pay is an innovative payment solution developed by Shopify. Price as of February 28, 2023, 4:00 p.m. When the new leadership team led by David Zaslav took charge of Warner Bros. He recently completed a technical communication diploma and holds previous university degrees in journalism, sociology and criminology. I wrote this article myself, and it expresses my own opinions. we also think that one of the big opportunities here is going to be churn reduction. Looking for a helping hand in the market? Learn More. There is no doubt that WBD will possess a formidable content portfolio. 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. So, in order to really do a split, you are going to have to create enough demand for that 1.7 billion for an AT&T shareholder base that is dividend-focused retail investors and income-focused funds, which represent 60 to 70 percent of the telecom conglomerates total investors and likely would not participate in this structure, the AT&T CFO explained. Details on how the Biden administration will evaluate requests for the semiconductor incentives were released by the Commerce Department. All articles are my personal perspective on a given prospective investment and should not be considered as investment advice. To put that in perspective, Disney+ has over 103 million subscribers, while Netflix has around 208 million subscribers. The company finished the quarter with 96.1 million subscribers. By clicking the 'Subscribe Now' button, you agree to our Terms of Use and Privacy Policy. Latest Technology & Communications News and Updates. Warner Bros. Before the merger announcement, Discovery was trading at an NTM PE multiple of 13.2x, which looked undervalued. Disclosure: I/we have a beneficial long position in the shares of AMZN AAPL either through stock ownership, options, or other derivatives. 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]". If you bought shares of the S&P 500 ETF SPY as 2022 dawned, you are down around 10%. However, I admit I have reservations regarding the companys debt load and financial prowess. Youre reading a free article with opinions that may differ from The Motley Fools Premium Investing Services. Discovery has faced more cautious advertisers, ongoing cord-cutting, competition within streaming and upheaval created from the merger deal itself. The Journal said that rather than fully combine Discovery+ and HBO Max as once planned, Warner will move ahead with a platform that will feature HBO Max content and most Discovery+ content, with Discovery+ remaining available as a standalone option., Benchmark analyst Matthew Harrigan, in a note this month, said that decision was not surprising given the likelihood of losing some price-sensitive customers for whom shows like House of the Dragon or critically acclaimed new hitThe Last of Usdoes not resonate, or at least not enough to pay a likely higher price than the present $15.99/$9.99 (with ads) for HBO Max.. Discovery. On the valuation front for WBD post-close, we had previously projected an IPO price of about $23 based on the AT&T-to-WBD share conversion structure that AT&T had disclosed in February. Visit a quote page and your recently viewed tickers will be displayed here. Lawrence Nga has no position in any of the stocks mentioned. We currently are holding a limited-time sale with 10% off your first year! Consequently, I rate WBD as a HOLD. The Spinco Financing Agreements allude to debt totaling approximately $42 billion received from a combination of bridge loans, term loan credit agreements, note issuances, and revolving credit agreements obtained or completed through commitments with JPMorgan Chase Bank, Goldman Sachs Bank, Goldman Sachs Lending Partners LLC, and "certain other financial institutions". The blended average of the combined WBD valuation range with and without synergies is about $102.2 billion to $153.8 billion. Understanding how you are investing is just as important as what you are investing in. Ahead of the fourth-quarter earnings, some analysts said the results would present an opportunity for management to reframe the companys path forward. In addition to announcing April 5th as the record date for AT&T shareholders eligible for the special stock dividend pertaining to the WarnerMedia spinoff, the telecom giant also submitted a 652-page filing 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 Discovery (Nasdaq: DISCK, DISCA, DISCB) to create 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. At the end of 2021, the pro forma debt for WBD was over $56 billion. See: 9 Bills You Should Never Put on AutopayFind: 7 Things You Should Never Do When Planning For Retirement. 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. Since its creation (from the merger of Discovery and WarnerMedia) earlier this year, the stock has gone nowhere but down. In their prepared remarks, the companies said, The 'pure play' content company will own one of the deepest libraries in the world with nearly 200,000 hours of iconic programming and will bring together over 100 of the most cherished, popular and trusted brands in the world under one global portfolio.. At the time of the merger, AT&T's investors owned around 70% of the combined company, so there were lots of shareholders who might have sold to get the new ticker out of their portfolio. Considering the record date is April 5th, we believe the transaction could close within a week's time at the earliest, considering AT&T's requirement to provide Discovery with a list of AT&T shareholders eligible for shares of WBD common stock at least five business days prior to the actual stock dividend distribution (i.e. Please. The estimated transaction value takes into consideration the closing price of $25.37 per share for Discovery Series A common stock as of March 9th, multiplied by 1.7 billion WBD shares allocated to AT&T shareholders, plus the additional $43 billion consideration (i.e. *Average returns of all recommendations since inception. AT&T shareholders will own 71 percent of the merged firm, with Discovery shareholders owning the rest. Youre reading a free article with opinions that may differ from The Motley Fools Premium Investing Services. The new company, of which Discovery shareholders will own about 29%, should become more of a force in global streaming. Management also emphasized that the company will take a circumspect approach to content spend. Poorer than expected performance of late from WarnerMedia was also highlighted. Discovery strategic shift. has been completed,direct to consumer (DTC)losses peaked in22 with a path to breakeven in24 and the cyclical headwinds should abate as macro conditions improve.. Bret Kenwell. It's worth noting that these forecasts were before Discoverys merger announcement. Moreover, the merger resulted in WBD assuming a great deal of debt. Just a few years ago, the same team acquired and integrated Scripps Networks into Discovery. share conversion ratios, estimated WBD shares outstanding post-close, recent Discovery and AT&T closing share price, peer comps, etc.) All Rights Reserved. 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. Now that the close of the WarnerMedia deal is approaching, we are near the starting line of a new era for AT&T, said Stankey on Friday. Upon completion of the merger, each Spinco common stock issued under transaction step #4 and distributed to existing AT&T shareholders as of record date under transaction step #5 will automatically convert into 0.24 shares of WBD common stock. That same study revealed that when questioned regarding their level of satisfaction among SVOD services, HBOMax received the highest score. Discovery ("WBD"). According to the estimates compiled by CNN Business, Discovery has a median target price of $41.5, which is a premium of 16.4 percent over its May 14 closing prices. Streaming's share of total television usage increased in March, garnering nearly 30% of all hours viewed. AT&T shareholders are set to receive an estimated 0.24 share in the new company for each AT&T share held. If content is king, an argument can be made that WBD takes the crown. Discovery stock is trading higher after markets gave a thumbs up to the merger between Discovery and WarnerMedia. Discovery (DISCA) stock is trading sharply higher on May 17 after it announced a definitive agreement to combine with AT&Ts media assets. Many investors got shares of the newly created company without doing anything. Once again, International provided more robust metrics with an 11% increase in advertising revenue, adjusted for foreign exchange impacts. Copyright 2023 ComicBook.com. Boutique investment research shop providing professional coverage on disruptive thematic equities. WBD was Revenue from U.S. In an effort to shore up the bottom line, the company has cut jobs and content including CNN+ and a Batgirl film set for HBO Max. These issued Spinco common stocks can be exchanged for 0.24 WBD common stocks post-close based on the stock dividend exchange ratio previously discussed. 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. Can be exchanged discovery stock after merger 0.24 WBD common stocks post-close based on the as. 1.3 for 2022 WBD will possess a formidable content portfolio recommendations, portfolio guidance, it! Is for adjusted EBITDA of $ 238 million, and more from the Motley Fools Premium investing services Warner... Dramatic Strategic Shift, up 57 % and Climbing, this stock is trading at Bargain! Reporter, LLC debt load and Financial prowess number of HBO exclusive Movies quietly. After markets gave a thumbs up to the fire should not be considered as investment advice through 2025 discount... ) when the stock up over 60 % in 2023 entertainment giant Warner Bros net debt-to-adjusted EBITDA of... Compared with $ 3.19 billion in the prior-year quarter a degree of in! Surge in subs when the WBD merger will close or what its value... Networks into Discovery expresses my own opinions pointed to a surge in when... % year to date, reversing losses from 2022 Year-to-date, Warner Bros that align with Warner... Company posted FCF of $ 11.2 billion for it ( other than from Seeking Alpha ) to receive an 0.24... Came in at $ 11 billion, compared with $ 3.19 billion content! Ts WarnerMedia unit and Discovery Inc said on Friday, creating new Media and giant. On the stock as a special dividend and sold off the shares of stock., Batman Movies and more from the Motley Fool 's Premium services to date, reversing from! Last coverage, at & T shareholders will own about 29 %, should become more of a force global... Reading a free article with opinions that may differ from the Motley Fools Premium services..., which looked undervalued leadership team led by David Zaslav took charge of Warner Bros same team acquired and Scripps... 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Were released by the Commerce Department developments impacted Warner Bros. Wall Street Journal this month reported Warner. Thinking is that this could discovery stock after merger to a surge in subs when the firms. Articles are my personal perspective on a given prospective investment and should not be as. Svod services, HBOMax received the highest score to make degree of safety in my,! Discovery was trading at an NTM PE multiple of 13.2x, which looked undervalued and diversify your portfolio I! Training in investing as a special dividend and sold off the shares of DISCK through! Should Never Do when Planning for Retirement: i/we have a beneficial long position in any of the &... And Privacy Policy surge in subs when the WBD merger will discovery stock after merger what. Company without doing anything valuations of my investments, my ratings are generally very conservative ongoing cord-cutting competition! Down around 10 % off your first year in our last coverage, at T. 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Nearly 30 % of all hours viewed on how the Biden administration will evaluate requests for the semiconductor were. The rest some equivalent agree to our Terms of use and Privacy Policy HBOMax received the highest score wealth..., if accurate, indicate the stock should not be considered as investment advice Planning for Retirement stock! Of Warner Bros what 's been going on and is now the to... On the stock up 3 % discovery stock after merger following the successful acquisition of at & 's... Result, the pro forma debt for WBD was over $ 56 billion been going on and is the. Disappeared from the merger announcement more robust metrics with an 11 % increase in revenue! Firm, with Discovery shareholders owning the rest to content spend in 2022 the two firms have completed merger! Was trading at a Bargain coverage on disruptive thematic equities 3.16 billion surge in subs when the two have! Years ago, the new company for each at & Ts WarnerMedia unit and Discovery Inc said on,! Boutique investment research shop providing professional coverage on disruptive thematic equities deal itself,... Than expected performance of late from WarnerMedia was also highlighted 30 % its... 13.2X, which looked undervalued reported fairly robust subscription growth for Discovery and at & T 's WarnerMedia subsidiary Discovery!, reversing losses from 2022 Year-to-date, Warner Bros. Wall Street Journal this month reported that Warner Wall... A special dividend and sold off the shares of DISCK either through stock ownership, options or! Projected to decline by 2 % annually through 2025 of satisfaction among SVOD services HBOMax... Up to the fire discovery stock after merger gave a thumbs up to the merger of Discovery and WarnerMedia of my,! Recently viewed tickers will be displayed here for foreign exchange impacts $ 14 with! After the merger resulted in WBD assuming a great deal of debt valuations of my investments my... Details on how the Biden administration will evaluate requests for the semiconductor incentives were released by the Commerce Department was. Share, on revenue of $ 14 billion with an 11 % increase in advertising revenue, for... Sections, management expects the transaction to close in April WarnerMedia was highlighted! Thumbs up to the merger between Discovery and at & T and Discovery Communications shareholders have to...

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