The securities analysts at Bank of America believe that the restructuring happening at Warner Bros. Discovery, involving their traditional TV, film studios, and streaming services, presents a situation worthy of close attention by investors, as it could potentially yield significant profits.
According to Jessica Reif Ehrlich from BofA Securities, she thinks that the individual market worth of Warner Bros. Discovery’s Studio and direct-to-consumer properties could surpass the company’s current market capitalization. She suggests that a potential separation or spinoff of these assets could help in releasing untapped shareholder value.
In a potential arrangement, Warner Bros. studios could team up with Max, allowing the Discovery cable channels to operate independently on their own – a strategy similar to what NBCUniversal is implementing with Versant. Moreover, as an independent linear network, there’s room for consolidating various linear assets that are currently managed by other media companies, according to Ehrlich’s perspective.
Once, cable businesses were profitable for studios. However, these days, TV channels have turned into a drain on profits, and investors have criticized companies burdened with channels that are no longer popular due to consumers preferring individual streaming services over bundles. NBCU is separating the majority of its cable properties (excluding Bravo but including CNBC) into a new company named Versant.
As of now, there’s been no official announcement about the division of WBD. However, the leading studio has started reshaping the company with a focus on potentially separating its classic television properties in the future. By December 2024, the studio declared that it had restructured its business model into a global linear TV sector, distinct from its streaming and production divisions.
WBD has initiated the initial stages of its upcoming corporate restructuring, aiming for completion by mid-2025. According to Ehrlich, this new organizational setup is intended to boost strategic agility and potentially unveil prospects to augment shareholder worth, as WBD functions in two distinct divisions.
The financial analyst from Wall Street recently stated that S&P Global had downgraded Warner Bros. Discovery (WBD) to ‘junk bond’ status for 2025 and 2026, due to weakness in linear TV. This is because the Hollywood studio is transitioning to streaming services. Interestingly, Ehrlich considered this as a positive development since the downgrade could increase WBD’s financial flexibility by providing more room to maneuver on their balance sheet.
During an investors conference on May 15th, Gunnar Wiedenfels, CFO of WBD, mentioned the potential for a strategic action within the company to more accurately showcase the worth of their studio assets, without providing any specific timeframe. He emphasized that while there isn’t a fixed timeline, they believe that the current stock price does not accurately represent the true value of their company.
Bank of America’s research analyst kept a positive outlook, recommending the purchase of WBD shares while setting a price target at $14.00. During early afternoon trade on Monday, the company’s stock was observed rising by 5 cents to reach $9.98.
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2025-06-02 20:24