DIS - Discovery: Attractive D2C Economics Waning Archegos Headwinds Low Valuations

• Discovery recently reported mixed results with revenues beating while adjusted EPS missing consensus estimates due to Discovery+ launch and related investments.
• Discovery Plus has gained 15 mn subscribers by April end and is generating solid engagement.
• While management hasn't given specific targets for Discovery+ breakeven, according to my calculations, it can achieve breakeven at much lower levels of paid subscribers versus other OTT peers.
• Credit Suisse is in final stages of sales of Archegos-linked stocks, of which Discovery was one of the largest positions, and post that the focus will return on the company's fundamentals.
• As the loss from next-generation initiatives narrows and the company reaches a $3bn plus (and growing) annual FCF run rate again over the next two years, the stock can more than double from the current levels.

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