WBD - Warner Bros. Discovery: The Stuff That Dreams Are Made Of
2024-05-22 10:23:17 ET
Summary
- Warner Bros is king in content generation with some iconic franchises.
- The financials are rock-solid and the cash-generation is out of discussion.
- Cable TV is still one of the most lucrative businesses and will not change anytime soon.
Warner Bros. Discovery's ( WBD ) price has declined by c.68% since Discovery and AT&T’s WarnerMedia closed the merger on April 8, 2022 , presenting a significant long investment opportunity. The market has, in my view, incorrectly penalised the company for the declining trend in cable, overestimated the operational risks post-merger, and the competition in SVOD, and misunderstood the company's cash-flow profile and its favourable debt structure. This has led to the company trading at quite depressed multiples, offering the potential for substantial returns.
The company’s intrinsic value is likely close to $19.0 per share (136% upside, considering the price as of 20/05/2024 of 8.1). Even in the event that the investment thesis is proven wrong, the company's downside risk is limited. This is because the market is currently pricing the worst-case scenario for WBD, providing a level of security for potential investors....
Warner Bros. Discovery: The Stuff That Dreams Are Made Of