Warner Bros. Discovery jumps 7% after being named ‘favorite media stock’ by Goldman for 23 years

Shares of Warner Bros. Discovery (WBD) are popular on Wall Street in early 2023.

The media giant’s shares rose 7% in mid-day trading on Tuesday after analysts at Goldman Sachs and Bank of America warned that the entertainment giant has good days ahead.

“According to our estimates, WBD is best positioned to drive EBITDA growth, [free cash flow]and will reduce its balance in 2023 as it aims for $3.5. [billion] merger synergy and relaunches its flagship streaming service,” wrote Goldman Sachs analyst Brett Feldman, calling the company the firm’s “favorite media stock” for 2023.

As investors debate the long-term outlook for traditional media, Feldman believes WBD is in a better position than its competitors, with Goldman citing key execution catalysts such as recent merger milestones and an upcoming streaming relaunch this spring.

Feldman maintains a buy recommendation for the stock with a target price of $19 per share.

Warner Bros. stock, which has lost nearly 60% in 2022, has risen more than 30% since Dec. 28.

Bank of America Global Research analyst Jessica Reif signaled an “improved narrative” for the company in the new year, writing in a new note to clients on Tuesday: “We remain optimistic about WBD’s long-term potential and view current risk/reward as very attractive”.

Wraith, who reiterated her Buy recommendation and $21 target price, also cited the company’s upcoming consumer-facing service as a catalyst for 2023, in addition to additional merger-related synergies and a more robust film production plan.

The analyst, who acknowledged that advertising hurdles are likely to impact fourth-quarter earnings results, said she still views the fourth quarter as “an opportunity for management to turn the page to 2023 and reset the narrative.”

“2022 has been marred by a combination of merger-related headwinds and cyclical and long-term pressures,” Reif said. “At this point, most of the hard work (related to restructuring costs, etc.) has been completed, direct consumer losses (DTC) peaked in 22 to break even in 24, and cyclical headwinds should ease as macroeconomic conditions improve.”

CEO of Warner Bros.  Discovery David Zaslav arrives for the Time 100 Gala, Celebrating the 100 Most Influential People in the World by Time magazine, in New York, USA on June 8, 2022. REUTERS/Caitlin Ochs

CEO of Warner Bros. Discovery David Zaslav arrives for the Time 100 Gala, celebrating the 100 most influential people in the world by Time magazine, in New York, USA on June 8, 2022. REUTERS/Caitlin Ochs

By 2022 at Warner Bros. Discovery has been pressured by various restructuring costs, macroeconomic issues, further loss of subscribers in linear TV and slowing advertising growth.

The company announced the unexpected departure of several key Discovery executives late last year as CEO David Zaslav redoubled efforts to streamline the debt-laden business.

“We paint a mural on the wall of a building, and everything falls off from there,” Zaslav said in a November interview with RBC Capital Markets analyst Kutgun Maral. “It looks dirty and it’s dirty. It’s really difficult and very difficult.”

“We have the best intellectual property in the world – we need the best structure and we need to spend money where it works,” Zaslav said.

Alexandra is a Senior Entertainment and Media Reporter at Yahoo Finance. Follow her on Twitter @alliecanal8193 and email her at [email protected]

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