Before the merger announcement, Discovery was trading at an NTM PE multiple of 13.2x, which looked undervalued. WBD currently trades for $18.88 a share. 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. Latest Technology & Communications News and Updates. 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.. has fallen 5.8% over that period. Investors will learn more in the coming quarters about how things are working out. Discovery, will start The Motley Fool recommends Discovery (C shares). Ahead of the Warner Bros. The Motley Fool recommends Warner Bros. $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. Discovery stock at a time when those shares dont fully reflect the value that we see long-term for the combined company.. One of the analysts rates WBD as a sell. If so, how? By comparison, the S&P 500 index 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. The company sits at 102 on the 2022 Fortune 500 list, making it a subject of considerable interest among investors of all Reading stock charts can be daunting at first, but here's how to make sense of it all. 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 This is according to TipRanks, which provides a 65% success rate and an average 17.6% annual return for my articles. Bolstered by strong international results, WBD increased total revenue by 13% to $3.16 billion. The thinly traded shares (ticker: DISCB) that are 95% owned by media mogul and Discovery board member John Malone traded Tuesday at $68.88, down $1.02. Learn More. The new management is trying hard to turn around the ship. takes the proverbial cake, with a stock price that plummeted over 65%. Many of the offers appearing on this site are from advertisers from which this website receives compensation for being listed here. Apple, one of the largest tech giants in the world, designs and manufactures cell phones, laptops, and smart devices. And Discovery's largest shareholder, John Malone, supported the deal wholeheartedly. Readers should consider their own unique investment profile and consider seeking advice from an investment professional before making an investment decision. If content is king, an argument can be made that WBD takes the crown. Step 7 The Merger - Once transaction steps #1-7 are complete, Discovery's Drake Subsidiary, Inc. merger subsidiary will merge into Magallanes, Inc. Spinco, with the Spinco being the surviving "wholly owned subsidiary of WBD". Advertiser Disclosure: Many of the offers appearing on this site are from advertisers from which this website receives compensation for being listed here. Under the Reverse Morris Trust-Type Transaction method, the parent company (i.e. 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. All Right Reserved. While Zaslav has not run a more traditional media company like WarnerMedia, the longtime Discovery CEO presided over the transition of the company from a cable network owner to an unscripted content creation powerhouse, said Macker. When the new leadership team led by David Zaslav took charge of Warner Bros. However, most of the analysts rate the stock as a hold or some equivalent. We could see some more consolidation in the streaming industry as the smaller players combine their resources to take on industry heavyweight Netflix. Discovery has faced more cautious advertisers, ongoing cord-cutting, competition within streaming and upheaval created from the merger deal itself. Maximize your income with the worlds highest-quality dividend investments. The reality of stock investment is that there's no better tool for building your wealth over time. There is meaningful churn on HBO Max, much higher than the churn that we have seen. Is this happening to you frequently? I own a house with my husband and mother. 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. Discovery ("WBD"). That same study revealed that when questioned regarding their level of satisfaction among SVOD services, HBOMax received the highest score. According to the company's latest 8K filing, it estimates 2,406,906,476 actual shares of WBD common stock to be issued upon completion of the transaction, derived as follows: WBD Shares Attributable to AT&T Shareholders (Author), WBD Shares Attributable to Discovery Shareholders (Author). Shop Pay is an innovative payment solution developed by Shopify. As of 12/08/2022 I am rated among the top 3% of authors in terms of overall results. are met. I am not receiving compensation for it (other than from Seeking Alpha). The new company will be able to compete in the streaming industry. Making the world smarter, happier, and richer. Discovery had done a nice job of consolidating the unscripted content portion of the media universe, but it was still a relative niche player in a world with emerging mega-bundles. 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. Please. A great deal has been made of how the combination of Discovery+ and HBOMax will create a winning streaming service; however, Discovery ranks low in terms of customer satisfaction and is near the bottom of the ratings regarding which streamer would be retained if viewers were limited to one service. The announcement has brought out financial gurus to assess whether Warner Bros. Additional disclosure: I have no formal training in investing. 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. Note that Discovery shares will not begin "two-way trading" because they will merge 100% with WarnerMedia and directly convert to WBD shares on a 1:1 ratio post-close (further discussed in later sections), as opposed to AT&T which is only spinning out its interest in WarnerMedia and will retain remaining operations of "AT&T RemainCo" post-close. Without a set value assigned to its streaming service, but with a massive potential for growth, Goldmans Brett Feldman has confidence in WBD. 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.) When you are thinking about how to As Stock Market Cools, Experts Advise How To Brace for the Worst. They expected a subscriber count of around 96.33 million. The Motley Fool has a disclosure policy. WBD projects $20 billion in content spend in 2022. 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. A merger rarely goes without hiccups, so while the dip in Warner Bros. -2.01% we also think that one of the big opportunities here is going to be churn reduction. 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. We will be a simpler, more focused company with the intent to become Americas best broadband provider.. In the merger presentation, AT&T said it will pay out about 40% to 43% of free cash flow as its dividend, while giving a $20 billion-plus estimate for free cash flow Some investors may have treated the spinoff as a special dividend and sold off the shares to get some cash. The mixed result is likely due to the intricacies of Discovery's different share classes, which carry different voting rights and liquidity. Revenue from U.S. The partnership has never fully gelled, though, and by 2021, they were already looking to get out, and Discovery was the suitor they landed on. 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. He called out this months blowout debut of the game Hogwarts Legacy, and announced a new deal for multiple Lord of the Rings movies further out. Q1 operating profit and cash flow for WarnerMedia were clearly below my expectations. Discovery transition into a direct-to-consumer powerhouse by focusing further investment in content and the user experience, which has garnered complaints on both HBO Max and Discovery+.. Invest better with The Motley Fool. Discovery stock. 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). To make the world smarter, happier, and richer. But it said that the ongoing reorganization, expected to be largely complete by the end of next year, could result in additional impairments above the revised estimates.. The streaming media and telecom worlds were shaken Monday, when AT&T (T -0.63%) announced it would be spinning off its WarnerMedia division and combining it with Discovery (DISCA) (DISCK). 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. Stephen Fry to Host Jeopardy! for ITV in U.K. Cannes Film Festival Names Ruben stlund Jury President, Australias Foxtel Inks Multi-Year Deal to Retain Warner Bros. The streaming space is crowded, and Warner Bros. Make this your go-to guide to understanding stock charts. Please try again later. Warner Bros. This array of content serves to attract and retain subscribers. 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 The companies are also forecasting annual cost synergies of $3 billion. Of that, $15 billion will be generated by direct-to-consumer services. AT&T stockholders will end up owning 71 percent of the new Warner Bros. Discovery, with Discovery shareholders holding the rest. We will not overspend to drive subscriber growth. 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. At least give management a few quarters to execute their strategies. Discovery, with Discovery shareholders holding the rest. We are the largest income investor and retiree community on Seeking Alpha with over 4600 members actively working together to make amazing retirements happen. I wrote this article myself, and it expresses my own opinions. Discovery. The Coke vs. Pepsi debate doesn't just apply to the supermarket the brands are also rivals in the stock market. There is no doubt that WBD will possess a formidable content portfolio. have both fallen around 25%, and Netflix (. ) Stock Market Sell-Off: Is Warner Bros. 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". 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 (DISCA) stock is trading sharply higher on May 17 after it announced a definitive agreement to combine with AT&Ts media assets. SPX, Discovery's ( NASDAQ: WBD) announcement that Hogwarts Legacy has generated $850 million in sales two weeks after its release shows why the gaming unit could boost the stock. 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. In fact, Amazon is the sole company with a share price gain over that time frame, and it lags the S&P by more than 15%. - April 18, 2022 08:39 am EDT. Discovery posted fourth-quarter 2022 earnings on Feb. 23, with revenue of $11.01 billion decreasing Now, after the merger is complete, we should look at the financials of the merged entity. While most AT&T shareholders are income-focused, the WBD transaction could make an attractive one-time trade to capitalize on promising near-term upside potential resulting from a valuation re-rate event. 2022 was mired by a combination of company-specific, merger-related headwinds along with cyclical and secular pressures, they continued. Following the merger early last month, WBD ranks as the number-three player in the U.S. video streaming business behind Netflix and Disney. These offers do not represent all available deposit, investment, loan or credit products. 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. Investors might want to take a more patient approach in dealing with the company. Looking for a helping hand in the market? Zaslav, in the companys earnings release, said that major restructuring decisions were behind us. However, Warner Bros. Trading AT&T and Discovery After $43 Billion Media Merger AT&T and Discovery have come to terms on a $43 billion media deal. I am not receiving compensation for it (other than from Seeking Alpha). Discovery+, added two million subscribers in the quarter, boosting its subscriber count to 24 million. We will not sort of chase aggressively behind subscriber growth. we will continue to be very thoughtful about our spend. Lawrence Nga has no position in any of the stocks mentioned. However, based on the stock's performance so far, it seems other shareholders have had different opinions about the value of the deal, including those who got shares without taking any action. 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. Echoing our thoughts from the previous coverage, we believe the fast-approaching WBD spinoff will be a promising play for participating AT&T investors. 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. They added that advertising trends in January appeared to have improved from December. NFLX has a projected net debt-to-adjusted EBITDA ratio of 1.3 for 2022. I/we have a beneficial long position in the shares of AMZN AAPL either through stock ownership, options, or other derivatives. Were it not for the effects of foreign exchange, International would have recorded a 30% increase. If you bought shares of the S&P 500 ETF SPY as 2022 dawned, you are down around 10%. 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. While cautious about an already crowded streaming market and international expansion issues, Morningstar analyst Neil Macker is bullish on the company, sharing an estimated share price of $40 and an enthusiastic outlook for the media conglomerates capacity for growth. The Motley Fool has positions in and recommends ASML, Advanced Micro Devices, Apple, Fortinet, Intel, Qualcomm, Taiwan Semiconductor Manufacturing, and Warner Bros. with the stock up over 60% year to date, reversing losses from 2022 Wiedenfels told the Deutsche Bank conference earlier in the day that the merger would create a blowout streaming product. Discovery (WBD -2.01%). AT&T Ex-Distribution Trading - AT&T shareholders can engage in "Ex-Distribution Trading" during the two-way trading period if they wish to only sell their right to AT&T RemainCo and retain their stock dividend pertaining to the WBD transaction. Discovery, they discovered that the previous management had been overly optimistic with their projection of Warner Bros. prospects. 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. HBO Max and Discovery Plus will be merged into a single digital platform under Warner Bros. Considering the intense competition in this space, I believe caution at this stage is warranted. 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. This increased its subscriber numbers to 76.8 million. Networks jumped 7% to $1.93 billion while International Networks registered 25% growth to $1.23 billion. The company reported nearly $450 million in next generation revenue, a 55% increase over the prior-year quarter. Leading up to WBDs second quarter earnings report, a number of equities analysts issued ratings statements and reduced price objectives for the company, including Cowen ($24, May 12), Bank of America ($23, July 14) and Moffett Nathanson ($18, July 22). Discovery said it expected bigger charges related to content-impairment and development write-offs and pretax restructuring charges. The new company might attract better valuation multiples as markets give premium valuations to streaming companies, while legacy media companies trade at tepid valuations. Ex-Distribution Trading will take place under the temporary NYSE ticker "T WD" during the two-way trading period. 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. Discovery stock is a bargain buy Warner Bros. All relevant risks are not covered in this article. Year-to-date, Warner Bros. Discovery stock is trading higher after markets gave a thumbs up to the merger between Discovery and WarnerMedia. earnings call on Thursday, said this year would be pivotal for the companys studio business. And right or wrong, management has made a decision to invest a lot of the incoming funds into a number of investment initiatives. Price as of February 28, 2023, 4:00 p.m. 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. 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. On HBO Max and Discovery Plus will be a discovery stock after merger, more focused company the! Temporary NYSE ticker `` T WD '' during the two-way trading period Pepsi debate does n't just discovery stock after merger. 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