Desroches also said on Monday that Stankey deserves enormous credit for the transformation of the company over his term so far as CEO, which has not even been two years. 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. 2023 GOBankingRates. Under the Reverse Morris Trust-Type Transaction method, the parent company (i.e. Together, these adverse developments impacted Warner Bros. do not materially differ from the assumptions applied in our previous computation of estimated upside potential in WBD attributable to AT&T shareholders, we have not made any subsequent edits. If you want full access to our Model Portfolio and all our current Top Picks, feel free to join us for a 2-week free trial at High Dividend Opportunities. After working in the energy industry for 18 years, he decided to change careers in 2016 and concentrate full-time on all aspects of writing. All rights reserved. Likewise, it's possible that Discovery had plenty of shareholders who didn't believe in the vision of a combined company and they could have sold their shares. While streaming would bring long-term growth, it also means more investment into content creation. Ex-Distribution Trading will take place under the temporary NYSE ticker "T WD" during the two-way trading period. NFLX has a projected net debt-to-adjusted EBITDA ratio of 1.3 for 2022. I am a also value / buy and hold investor. The streaming merger is the latest move from a management team firmly dedicated to Zaslavs more disciplined, cost-savings vision for the company. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services. The forecast is for adjusted EBITDA of $14 billion with an FCF conversion rate of 60% in 2023. to create Warner Bros. I seek a degree of safety in my investments by. The streaming merger is the latest move from a management team firmly dedicated to Zaslavs more disciplined, cost-savings vision for the company. NFLX also held $6 billion in cash. This might explain the initial fall in Warner Bros. At least give management a few quarters to execute their strategies. The company posted FCF of $238 million, and operating expenses decreased 8% to $907 million. Financial Insight in Your Inbox: Sign Up for GBR's Daily Newsletter, Maximize your savings with these 3 expert tips. 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. 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. We have also identified and consolidated all that you need to know about how the transaction will take place based on the 8K filing so you don't have to spend your time-off going through 652-pages of legal and accounting jargons and instead skip right to the "need-to-knows" - key items to take note of include details on the transaction step plan, pre- and post-close share structure, transaction consideration to AT&T, as well as industry estimates to the transaction value post-close. The gap period will be at least a week (but complete within April according to the intended closing period proposed by management), considering AT&T will be required to provide Discovery with a list of AT&T shareholders eligible for shares of WBD common stock as of record date at least five business days prior to the actual stock dividend distribution. Magallane, Inc. is actually the "Spinco" subsidiary, wholly owned by AT&T, created specifically for the spinoff of its WarnerMedia assets. That compares to $140 million in net income and EPS of $0.21 in the comparable quarter. 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. The new management is trying hard to turn around the ship. WBD projects $20 billion in content spend in 2022. Of course, the numbers behind the earnings report pertain to the former Discovery, Inc; however, management provided some important metrics related to WarnerMedia, as well as some relevant commentary. 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. In February, the merger received approval from the U.S. Department of Justice, the key regulatory hurdle for the merger. 2023 The Hollywood Reporter, LLC. That Let the power of quality research drive your investment convictions. Considering the intense competition in this space, I believe caution at this stage is warranted. See which stock you should consider. 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. Despite the recent subscriber losses reported by Netflix, there is reason to believe that streaming services will continue to grow. There was an unknown error. Of that, $15 billion will be generated by direct-to-consumer services. This segues into a comparison of WBDs financial firepower with that of its rivals. *Average returns of all recommendations since inception. The merger deal will see AT&T spin off WarnerMedia, to be merged with Discovery. Is This the Best Streaming Stock for 2023? This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). SPX, David has covered a wide variety of financial and lifestyle topics for numerous publications and has experience copywriting for the retail industry. The new entity will focus on streaming services. Transaction details disclosed are pointing to upsides in WBD attributable to participating AT&T shareholders of more than 77%, which is consistent with our previous analysis in late March. In the last quarter before the merger, AT&T reported 2.5% year-over-year revenue growth in its Warner segment, including 16% growth in the Direct-to-Consumer business. The consensus 12-month price target of the five analysts rating the stock is $37.25. Making the world smarter, happier, and richer. Discovery stock after the merger has been unpleasant, management can still make Ahead of the fourth-quarter earnings, some analysts said the results would present an opportunity for management to reframe the companys path forward. On Friday, Discovery shareholders formally approved the mega-combination of the factual and lifestyle media powerhouse Discovery with AT&Ts entertainment arm. Find Out If You Got a Pell Grant as Student Loan Forgiveness Enters Supreme Court, 7 Things You Should Never Do When Planning For Retirement. The decision has many financial experts speculating on the best way to approach the companys stock moving forward. Considering the latest disclosure of WBD transaction details (e.g. Were it not for the effects of foreign exchange, International would have recorded a 30% increase. -0.30% Copyright 2023 ComicBook.com. Please. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services. Q1 operating profit and cash flow for WarnerMedia were clearly below my expectations. We will not sort of chase aggressively behind subscriber growth. These issued Spinco common stocks can be exchanged for 0.24 WBD common stocks post-close based on the stock dividend exchange ratio previously discussed. Youre reading a free article with opinions that may differ from The Motley Fools Premium Investing Services. Its options had been the spinoff, in which AT&T stockholders will receive shares in the merged company in addition to their existing AT&T shares; a split-off, which would have allowed shareholders to choose between stock of AT&T and the new company; or some combination of the two. Should we prevent her from inheriting it? 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. (I update this score on at least a quarterly basis for readers.). The European Commission, the executive body of the European Union, had approved the deal in December. According to the estimates compiled by CNN Business, Discovery has a median target price of $41.5, which is a premium of 16.4 percent over its May 14 closing prices. When asked if they could only keep one streaming service, HBOMax ranked third, falling behind Hulu and Netflix, but well ahead of Disney+ and Prime Video. Networks jumped 7% to $1.93 billion while International Networks registered 25% growth to $1.23 billion. WBD was Last week, AT&T confirmed April 5th at market close as the record date for the stock dividend related to the WarnerMedia spinoff. AT&T last week outlined its vision to be a leading broadband provider in the U.S. following the WarnerMedia transaction. In a filing in December, Warner Bros. Invest better with The Motley Fool. AT&T and Discovery sound optimistic about the new company's outlook. Hogwarts Legacy launched on Feb. 10. $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. In a research note to investors, Feldman said that the merged Warner Bros. Some investors may have treated the spinoff as a special dividend and sold off the shares to get some cash. ET. -2.01% These offers do not represent all deposit accounts available. Net income for the quarter hit $456 million, with EPS of $0.69 cents. There will be three trading options available for AT&T shareholders beginning April 4th (or technically, post April 5th market close when an existing AT&T shareholder on record date is marked eligible for the right to shares of WBD common stock post-close): All transactions taken place during the two-way trading period under "T WD" and "WBDWV" "will settle after the closing date of the [WBD] transaction". Also, the company has started to benefit from the cost synergies, which partially mitigated the downsides. On 7.14 billion current shares, that's about $1.18 per share, just a little more than half the $2.18 payout today. Management also emphasized that the company will take a circumspect approach to content spend. 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. I have no business relationship with any company whose stock is mentioned in this article. Discovery has faced more cautious advertisers, ongoing cord-cutting, competition within streaming and upheaval created from the merger deal itself. Here is a stat that might surprise many readers: every stock listed above has underperformed the S&P 500 over the last three years by a wide margin. 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". To balance that debt, at the end of 2021, WBD had a bit over $4.1 billion in cash. The blended average of the combined WBD valuation range with and without synergies is about $102.2 billion to $153.8 billion. It had been up as much as 9% in morning trading but has been in a Understanding how you are investing is just as important as what you are investing in. Essentially, the issued Spinco common stocks represent the rights to shares of WBD common stock distributed to existing AT&T shareholders as of record date. It has been awful time for investors in media company Warner Bros. Discovery CEO David Zaslav will run the merged giant, with Discovery CFO Gunnar Wiedenfels serving as the new companys CFO. 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. Warner Bros. Since the merger was structured so that AT&T would spin off its holding of WarnerMedia and then merge the company with Discovery, AT&T investors got shares of the new company without doing anything. Learn More. We expect that Zaslav will use his experience to help Warner Bros. Discovery is now a buy, hold or sell. However, we have taken additional consideration of the valuation sensitivity analysis performed by the WBD transaction advisors, Allen & Company and J.P. Morgan, as disclosed in AT&T's most recent 8K filing dated March 28th to further gauge the upside potential in WBD post-close. See: 9 Bills You Should Never Put on AutopayFind: 7 Things You Should Never Do When Planning For Retirement. We are the largest income investor and retiree community on Seeking Alpha with over 4600 members actively working together to make amazing retirements happen. 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. The merger also benefited AT&T's share prices, although not quite as much; most of the money from the acquisition is going to go into clearing out some of the telecom giant's debt in the coming months. Here are the key levels for AT&T shareholders will own 71 percent of the merged firm, with Discovery shareholders owning the rest. Is DISCA stock a good buy after the AT&T merger news? 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. 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). Bret Kenwell. If you have taken a look at AT&T's latest 8K filling dated March 28th, you would notice that the filing registrant is "Magallanes, Inc.". AT&T shareholders are set to receive an estimated 0.24 share in the new company for each AT&T share held. Discovery stock is trading higher after markets gave a thumbs up to the merger between Discovery and WarnerMedia. : Holiday Haunt have been shelved. WarnerMedias domestic linear TV revenue is projected to decline by 2% annually through 2025. 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. 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. Discovery merger, AT&T and Discovery Communications shareholders have decisions to make. I am not receiving compensation for it (other than from Seeking Alpha). Maximize your income with the worlds highest-quality dividend investments. Discovery (WBD) CEO David Zaslav announced plans to combine HBO Max and Discovery+ into one streaming service. The streaming space is crowded, and Warner Bros. WBDs forward P/E and 5-year PEG ratio, if accurate, indicate the stock is trading at a bargain. WBD quickly axed CNN+ shortly after the April merger (although some of CNNs programming can be found on Discovery) and just this week confirmed that two films slated for an HBO Max-only release the anticipated Batgirl and the animated Scoob! The future of WarnerMedia was for a long time undecided until AT&T eventually divulged the details of a massive merger with Discovery. Discovery ended last week with their stock up 3%, following the successful acquisition of AT&T's WarnerMedia subsidiary by Discovery. I have no business relationship with any company whose stock is mentioned in this article. Now consider that Amazons (AMZN) cash and marketable securities totaled $96.1 billion at the end of 2021, and that Apples cash and investments totaled $205.6 billion at the end of 1Q22. Revenue came in at $11 billion, compared with $3.19 billion in the prior-year quarter. 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