What happened?
shares of Warner Bros. Discovery (WBD 5.35%) rose on Wednesday after upbeat analyst comments. By the close, the media company’s share price was up 5.3% after rising 11.4% earlier in the day.
so what
Telecom Titan AT&T ( T 0.71%) recently spun off its WarnerMedia assets and merged it with television conglomerate Discovery. Investors had their first opportunity to buy shares in the combined company on Monday.
On Wednesday, Bank of America Analyst Jessica Reif Ehrlich bought Warner Bros. Discovery stock. She sees the stock price rising 73% to $45 in the coming year.
Image source: Getty Images.
With his valuable collection of cable and streaming properties, Reif Ehrlich believes the new company will quickly become a powerhouse in the global media industry. Its assets include popular television networks HGTV, CNN, and Food Network, as well as fast-growing streaming services HBO Max and Discovery+.
Additionally, Reif Ehrlich expects Warner Bros. Discovery to easily meet management’s goal of $3 billion in post-merger cost savings. In turn, she believes the company can grow its earnings before interest, taxes, depreciation and amortization (EBITDA) by more than 14% annually through 2025.
What now
Despite the promising long-term outlook, investors should expect some near-term selling pressure on Warner Bros. Discovery stock. Reif Ehrlich warned that many former AT&T shareholders, who tend to be income-oriented, may choose to sell the stock received as part of the merger. Unlike AT&T, Warner Bros. Discovery doesn’t pay a dividend.
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