Yahoo Finance Warner Bros. Discovery jumps 7% after Goldman names 'favorite media stock' for '23
Warner Bros. Discovery (WBD) stock is getting love from Wall Street to kick off 2023.
Shares of the embattled media giant climbed 7% in mid-afternoon trading on Tuesday after analysts at both Goldman Sachs and Bank of America signaled brighter days ahead for the embattled entertainment giant.
"We estimate that WBD is best positioned to drive EBITDA growth, ramp [free cash flow], and de-lever its balance sheet in 2023 as it pursues $3.5 [billion] of merger synergies and relaunches its flagship streaming service," Goldman Sachs analyst Brett Feldman wrote, listing the company as the firm's "favorite media stock" for 2023.
As investors debate the long-term outlook for traditional media, WBD is best-positioned relative to competitors in Feldman's view, with Goldman citing key execution catalysts like recent merger milestones and its upcoming streaming relaunch this spring.
Feldman maintains a Buy rating on the stock with a price target of $19 a share.
Shares of Warner Bros., which lost close to 60% in 2022, are up more than 30% since Dec. 28.
Over at Bank of America Global Research, analyst Jessica Reif signaled an "improving narrative" for the company in the new year, writing in a new note to clients out Tuesday: "We continue to remain bullish on the long term potential of WBD and view the current risk/reward as highly attractive."
Reif, who reiterated her Buy rating and $21 price target, also referenced the company's upcoming direct-to-consumer service as a 2023 catalyst, in addition to incremental merger related synergies and a more robust film slate.
The analyst, who admitted advertising headwinds will likely impact fourth quarter earnings results, said she still views Q4 as "an opportunity for management to turn the page to 2023 and reset the narrative."
"2022 was mired by a combination of company specific merger related headwinds along with cyclical and secular pressures," Reif said. "At this point, the majority of heavy lifting (related to restructuring charges etc.) has been completed, direct to consumer (DTC) losses peaked in '22 with a path to breakeven in '24 and the cyclical headwinds should abate as macro conditions improve."
Warner Bros. Discovery was pressured in by 2022 by various restructuring charges, macroeconomic challenges, further subscriber losses in linear television, and a slowdown in advertising.
The company announced the surprise exits of several key Discovery executives at the end of last year as CEO David Zaslav doubles down on streamlining the debt-ridden business.
"We're painting a mural on the side of a building, and all kinds of stuff is falling off," Zaslav said in an interview with RBC Capital Markets analyst Kutgun Maral in November. "It looks messy, and it is messy. It's really hard and it's really challenging."
"We have the best IP in the world — we need the best structure and we've got to spend money where it's working," Zaslav said.
Alexandra is a Senior Entertainment and Media Reporter at Yahoo Finance. Follow her on Twitter @alliecanal8193 and email her at alexandra.canal@yahoofinance.com
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