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. Stock Market Sell-Off: Is Warner Bros. I have approximately 20 years experience as a retail investor. Learn More. Discovery merger, AT&T and Discovery Communications shareholders have decisions to make. Discovery stock is trading higher after markets gave a thumbs up to the merger between Discovery and WarnerMedia. Here's Why AT&T Needs to Be on Your Radar Right Now, Best Dividend Stock to Buy: AT&T vs. Ford vs. Intel, 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, Copyright, Trademark and Patent Information. The Motley Fool recommends Warner Bros. Discovery has over 15 million paying streaming subscribers globally, while HBO and HBO Max reportedly have 64 million subscribers globally. The Coke vs. Pepsi debate doesn't just apply to the supermarket the brands are also rivals in the stock market. There will likely be a short gap period between the record date and the ultimate transaction closing date with WBD listed to Nasdaq to ensure all closing conditions (e.g. 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. 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. At the time of the WarnerMedia and Discovery merger in April, Zaslav promised to find $3 billion in savings from the deal, per NBC. 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. 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. Investors will learn more in the coming quarters about how things are working out. Investors had high hopes for Warner Bros. In 2000, internet service provider America Online bought Time-Warner, Inc. to form AOL Time Warner, but when the dot-com bubble burst, that partnership dissolved quickly. 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. Discovery, which has no dividend. After a financial scandal tarnished the Kinney brand, they became Warner Communications in 1972. AT&T announced last week that April 5th at market close will be the record date for AT&T shareholders eligible for the special stock dividend pertaining to the upcoming WBD transaction. Billy Duberstein owns shares of AT&T, Discovery (C shares), and Netflix. Discovery stock. 16 Million Approved for Biden Student Loan Forgiveness Plan Will Supreme Court Uphold? 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. We expect that Zaslav will use his experience to help Warner Bros. have both fallen around 25%, and Netflix (. ) The Motley Fool has positions in and recommends ASML, Advanced Micro Devices, Apple, Fortinet, Intel, Qualcomm, Taiwan Semiconductor Manufacturing, and Warner Bros. Make this your go-to guide to understanding stock charts. 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 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+.. May 17, 2021 2:01 PM EDT. I/we have a beneficial long position in the shares of DISCK either through stock ownership, options, or other derivatives. Discovery (NASDAQ:WBD) has slipped over 20%, Comcast (CMCSA) is down about 18%, shares of Disney (DIS) and Amazon (AMZN) have both fallen around 25%, and Netflix (NFLX) takes the proverbial cake, with a stock price that plummeted over 65%. 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. In early Monday trading, the shares of the It has been awful time for investors in media company Warner Bros. Revenue came in at $11 billion, compared with $3.19 billion in the prior-year quarter. The management team has plenty of experience executing mergers. Discovery, Wall Street is turning its attention to the outlook for the new conglomerates stock that began trading on Monday under the ticker symbol WBD.. Under the terms of the deal, WarnerMedia retained $43 billion in debt. Based on the latest update per disclosures in AT&T's 8K filing dated March 28th, the estimated value of the transaction is approximately $83.4 billion. Ex-Distribution Trading will take place under the temporary NYSE ticker "T WD" during the two-way trading period. With the steady hand of Zaslav now in command of more world-class media assets he can now deploy internationally, Discovery has gone from a small unscripted player to a scaled global behemoth across scripted, unscripted, and news content. That will simplify things a whole lot, both for the companies and their investors. Members of High Dividend Opportunities get exclusive ideas and guidance to navigate any climate. Ahead of the Warner Bros. I am a retired law enforcement officer. The new company will be able to compete in the streaming industry. 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. We had previously estimated about 2.4 billion WBD shares outstanding post-close according to AT&T's stock dividend structure of 0.24 WBD shares for each AT&T share. And it will be available in 220 countries and 50 languages. 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. These are high-margin services that AT&T needs to get right, and where it's up against stiff competition in the telecom space. 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. Is this happening to you frequently? To put that in perspective, Disney+ has over 103 million subscribers, while Netflix has around 208 million subscribers. Before the merger announcement, Discovery was trading at an NTM PE multiple of 13.2x, which looked undervalued. 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". AT&T is also still behind competitors in 5G deployment, and is up against stiff competition in the fiber broadband space. The Wall Street Journal this month reported that 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. That same study revealed that when questioned regarding their level of satisfaction among SVOD services, HBOMax received the highest score. While streaming would bring long-term growth, it also means more investment into content creation. It's worth noting that these forecasts were before Discoverys merger announcement. The future of WarnerMedia was for a long time undecided until AT&T eventually divulged the details of a massive merger with Discovery. So why did a spinoff of WarnerMedia make sense as a key step in the combination? Under WBDWV Trading, AT&T shareholders will be able to sell their right to WBD shares distributed to them as a result of their AT&T share ownership as of the record date through the temporary Nasdaq ticker "WBDWV" beginning April 4th. Let the power of quality research drive your investment convictions. If you Jakub Porzycki / NurPhoto / Shutterstock.com. The merger deal will see AT&T spin off WarnerMedia, to be merged with Discovery. 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 This increased its subscriber numbers to 76.8 million. Financial Insight in Your Inbox: Sign Up for GBR's Daily Newsletter, Maximize your savings with these 3 expert tips. Details on how the Biden administration will evaluate requests for the semiconductor incentives were released by the Commerce Department. What Is the Standard Deduction for People Over 65 in 2023? The transformation weve undergone over the past 18 months while delivering outstanding operational results has brought us to this point. Sign up for our daily newsletter for the latest financial news and trending topics. 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. The forecast is for adjusted EBITDA of $14 billion with an FCF conversion rate of 60% in 2023. Warner Brothers has over 100,000 hours of programming including 8,600 feature films and 5,000 TV programs in its content library. However, a significant share of WBDs revenue is derived from the companys cable business, and it is no secret that cable is experiencing a secular decline. The companies are forecasting a free cash flow conversion ratio of 60 percent, which looks very healthy. Lawrence Nga has no position in any of the stocks mentioned. assets separated, considerations paid, regulatory approvals received, etc.) Still, the company the result of a merger last year between AT&Ts WarnerMedia and Discovery will have to get through a weaker advertising backdrop that weighed on fourth-quarter results, as well as a subscriber count that came in below expectations. In February, the merger received approval from the U.S. Department of Justice, the key regulatory hurdle for the merger. Youre reading a free article with opinions that may differ from The Motley Fools Premium Investing Services. If content is king, an argument can be made that WBD takes the crown. See which stock you should consider. However, the media merger has thus far been a 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.. Discovery Makes a Dramatic Strategic Shift, Up 57% and Climbing, This Stock Is Still a Bargain Buy in 2023. 2023 The Hollywood Reporter, LLC. Sign up for THR news straight to your inbox every day. Discoverys stock was down 2.9 percent at $27.10 at that time. Warner Bros. Discoverys revenue fell short of expectations in Q4 as the company lost more than $2 billion on linear, streaming, & studio. 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. The idea is that Warners has not been fully capitalizing on the brand's potential. In his first earnings report since an April merger created one of the largest media companies in the U.S., on Aug. 4 Warner Bros. 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. By Russ Burlingame 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. What the Smartest Investors Know About Warner Bros. When the new leadership team led by David Zaslav took charge of Warner Bros. net asset value under U.S. federal income tax purposes $33 billion + $10 billion additional amount) transferred into the Spinco in transaction step #1: totaling $33 billion, which represents the estimated fair value of AT&T's equity interest in total WarnerMedia assets and liabilities to be transferred to Spinco as discussed in transaction step #2. Youre reading a free article with opinions that may differ from The Motley Fools Premium Investing Services. Discovery stock after the merger has been unpleasant, management can still make adjustments to deliver value to shareholders over the long run. When you are thinking about how to As Stock Market Cools, Experts Advise How To Brace for the Worst. Without the ability to invest billions in content to compete with the likes of Netflix, legacy cable companies were likely to get left behind, or at least become niche offerings without much growth. The specific transaction structure will be executed in the seven steps as follows: Step 1 The Separation - Prior to AT&T's distribution of rights to shares of WBD common stock to existing AT&T shareholders as of record date and the final merger completion, AT&T will have to transfer all of its equity interests in the assets and liabilities attributable to its WarnerMedia business to the Magallanes, Inc. Spinco. I wrote this article myself, and it expresses my own opinions. Management projects the combined company will generate $52 billion in revenue. *Average returns of all recommendations since inception. Readers should consider this when weighing my buy/hold/sell recommendations. 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. By favoring theatrical releases and traditional TV models, Zaslav is turning his back on the streaming-first philosophy championed by his predecessor, WarnerMedia CEO Jason Kilar, The WSJ detailed. -0.30% The Hollywood Reporter is a part of Penske Media Corporation. AT&T shares fell in pre-market trading and were down 4.3 percent to $24.40 as of 7:45 a.m. The thinking is that this could lead to a surge in subs when the two services are combined. The companies are also forecasting annual cost synergies of $3 billion. The new management is trying hard to turn around the ship. 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. In other words, if an AT&T shareholder decides to sell an AT&T share under Ex-Distribution Trading between April 4th and the WBD transaction completion date, they will only be retaining rights to the WBD shares distributed to them as a result of their AT&T share ownership as of the record date (April 5th market close). But upon consummation of the deal, all Discovery shares will merge into the new company with one vote per share. Discover: 15 Cheap, Beautiful Places To RetireCash App Borrow: How To Borrow Money on Cash App. Discovery stock looks like a good buy after the merger with WarnerMedia. Looking for a helping hand in the market? To make the world smarter, happier, and richer. Among the reports that came out of the first week of Warner Bros. I wrote this article myself, and it expresses my own opinions. Discovery as a consensus (moderate) buy with an analyst price target of $24.79. Discovery (NASDAQ: WBD) when the stock went public last April. The resultant company, Warner Bros. : Holiday Haunt have been shelved. -2.01% With the megamerger of Discovery and AT&Ts WarnerMedia closing late on Friday, creating new media and entertainment giant Warner Bros. The new entity will focus on streaming services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. DISCA stock looks like a good buy at the current prices. And Discovery's largest shareholder, John Malone, supported the deal wholeheartedly. We will not sort of chase aggressively behind subscriber growth. Market Realist is a registered trademark. ET. All relevant risks are not covered in this article. Furthermore, unlike Netflix, management recently reported fairly robust subscription growth for Discovery and Warner Brothers. 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%. As discussed in detail in our last coverage, AT&T will spinoff 100% of its current interest in WarnerMedia post-close. It had been up as much as 9% in morning trading but has been in a AT&T shareholders are set to receive an estimated 0.24 share in the new company for each AT&T share held. Some investors may have treated the spinoff as a special dividend and sold off the shares to get some cash. Discovery Communications and its three share classes will no longer exist as the company, unlike AT&T, will fully be merged into Warner Bros. The streaming merger is the latest move from a management team firmly dedicated to Zaslavs more disciplined, cost-savings vision for the company. Discovery stock at a time when those shares dont fully reflect the value that we see long-term for the combined company.. Discovery posted fourth-quarter 2022 earnings on Feb. 23, with revenue of $11.01 billion decreasing 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. A total of 26.26 million student loan borrowers have applied or were deemed automatically eligible for relief under President Joe Biden's student loan forgiveness program, and there are 16.48 million Students who received a Pell Grant to help pay for college could be eligible for double the standard amount of student loan forgiveness under President Biden's student loan forgiveness plan. 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. $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. 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