WBD projects $20 billion in content spend in 2022. The company the result of a merger last year between AT&Ts WarnerMedia and Discovery reported a fourth-quarter net loss of $2.08 billion, or 86 Warner Brothers has over 100,000 hours of programming including 8,600 feature films and 5,000 TV programs in its content library. In a filing in December, Warner Bros. Many of the offers appearing on this site are from advertisers from which this website receives compensation for being listed here. Price as of February 28, 2023, 4:00 p.m. Trading AT&T and Discovery After $43 Billion Media Merger AT&T and Discovery have come to terms on a $43 billion media deal. Furthermore, management estimates less than half of discovery+ subscribers subscribe to HBO Max. Discovery stock after the merger has been unpleasant, management can still make Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. That sale is being blamed for the slow pace of renewals for some of The CW's shows, including the Warner Bros.-ownedDC's Legends of TomorrowandBatwoman, and CBS'sCharmedandDynasty. Discovery a Buy? On Feb. 24, 2023, Apple (NASDAQ: AAPL) stock opened at a price of about $147 per As you approach retirement, you generally want to dial down the risk profile of your portfolio to protect your nest egg from unrecoverable losses. Please. 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. Please disable your ad-blocker and refresh. ) Read More About: AT&T Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services. Cost basis and return based on previous market day close. Were it not for the effects of foreign exchange, International would have recorded a 30% increase. -0.30% The company finished the quarter with 96.1 million subscribers. 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. Is this happening to you frequently? Ahead of the fourth-quarter earnings, some analysts said the results would present an opportunity for management to reframe the companys path forward. Chief Financial Officer Gunnar Wiedenfels, during Warner Bros. Discoverys Many investors got shares of the newly created company without doing anything. Management discussed a number of concerns to be addressed now that the merger is complete. The company previously expected $3 billion in annual run-rate synergies from the merger, but during the last earnings call, CFO Wiedenfels stated the $3 billion target might be conservative. Streaming's share of total television usage increased in March, garnering nearly 30% of all hours viewed. 111). Erik Khalitov/iStock Unreleased via Getty Images. Discovery ("WBD"). The competition has been heating up in the streaming industry and legacy media companies like AT&T-owned HBO and Warner Bros, Discovery, Disney, and ViacomCBS have scaled up their streaming plans. The spinoff and dividend cut is probably the right long-term move for AT&T, as it will offload some $43 billion in debt to the new WarnerMedia company. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). Desroches mentioned that Discovery currently has 700 million shares outstanding, while 1.7 billion new shares will come to market as part of the transaction. NEW YORK and DALLAS, April 8, 2022 Today Discovery, Inc. and AT&T Inc. * ( NYSE:T) announced that they have closed their transaction to combine the Since I require a discount in the share valuations of my investments, my ratings are generally very conservative. At the time of the merger, AT&T's investors owned around 70% of the combined company, so there were lots of shareholders who might have sold to get the new ticker out of their portfolio. Learn More. Bret Kenwell. Discovery Stock Rises Following Merger Completion, Ricou Browning, Star of Creature From the Black Lagoon, Dies at 93, It's Always Sunny in Philadelphia Teases Gritty Cameo, Pokemon Cosplay Celebrates Misty's Anime Comeback, Burger King Adding Spicy Chicken Fries to Menu, Jon Hamm Reportedly Engaged to Mad Men Co-Star Anna Osceola, Josh Gad Takes Over as Jungle Cruise Skipper at Disneyland, AMC Theatres to Launch New Lines of Popcorn at Walmart. Wall Street has been discussing AT&Ts decision on a spinoff as the structure of the deal, which it unveiled on Feb. 1. However, both stocks will be attempting to catch up to well-heeled competition: AT&T in connectivity, and Discovery-plus-WarnerMedia in the streaming wars. These offers do not represent all deposit accounts available. with the stock up over 60% year to date, reversing losses from 2022 In the age of large, mega-sized streaming companies, it appears that bigger is better. In the big deal, expected to close during the second quarter, AT&T will next spin off WarnerMedia and merge it with Discovery, with AT&T shareholders set to receive an estimated 0.24 share in the new company for each AT&T share held. While most AT&T shareholders are income-focused, the WBD transaction could make an attractive one-time trade to capitalize on promising near-term upside potential resulting from a valuation re-rate event. Consequently, there could be significant overseas subscribers added. Net income for the quarter hit $456 million, with EPS of $0.69 cents. Upon closing, Magallane, Inc. Spinco will merge with "Drake Subsidiary, Inc.", the wholly owned "merger subsidiary" of Discovery's to create WBD. Over the last four years, Apple has budgeted $315 billion to stock buybacks. Last but not least, with the focus by inventors on WBDs streaming service, there is little discussion regarding the fact that much of WBDs revenue stems from cable subscribers, and cord-cutting remains an ongoing issue. Youre reading a free article with opinions that may differ from The Motley Fools Premium Investing Services. Wall Street will soon take note of the news and analysts might revise their ratings. ET. 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. Discovery, with Discovery shareholders holding the rest. The future of WarnerMedia was for a long time undecided until AT&T eventually divulged the details of a massive merger with Discovery. Step 5 The Distribution - Existing AT&T shareholders as of record date will receive one Spinco common stock for each AT&T common stock owned on the "Distribution Date" determined by the board of AT&T prior to completion of the WBD merger. The specific transaction structure will be executed in the seven steps as follows: Step 1 The Separation - Prior to AT&T's distribution of rights to shares of WBD common stock to existing AT&T shareholders as of record date and the final merger completion, AT&T will have to transfer all of its equity interests in the assets and liabilities attributable to its WarnerMedia business to the Magallanes, Inc. Spinco. Discovery's ( NASDAQ: WBD) announcement that Hogwarts Legacy has generated $850 million in sales two weeks after its release shows why the gaming unit could boost the stock. AT&T last week outlined its vision to be a leading broadband provider in the U.S. following the WarnerMedia transaction. AT&T Ex-Distribution Trading - AT&T shareholders can engage in "Ex-Distribution Trading" during the two-way trading period if they wish to only sell their right to AT&T RemainCo and retain their stock dividend pertaining to the WBD transaction. Warner Bros. As of Aug. 5, MarketBeat lists Warner Bros. The merger with Discovery has the above-stated benefits for AT&T, including significantly reduced debt. Bill Peters is a Los Angeles-based MarketWatch reporter who covers earnings. And as I'm looking under the hood here again, CNN+ is just one example, and I don't want to go through sort of a list of specific examples, but there's a lot of chunky investments that are lacking what I would view as a solid analytical, financial foundation and meeting the ROI hurdles that I would like to see for major investments. The Coke vs. Pepsi debate doesn't just apply to the supermarket the brands are also rivals in the stock market. The new company will be able to compete in the streaming industry. Please note that I am in the process of planning a subscription service with Seeking Alpha's Marketplace. AT&T shares fell in pre-market trading and were down 4.3 percent to $24.40 as of 7:45 a.m. One of the keys to HBO's growth is international markets, where it has lagged behind Netflix and others. 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! Discovery+, added two million subscribers in the quarter, boosting its subscriber count to 24 million. While I still own a small token amount of AT&T, my allocation to Discovery is much larger, and Discovery looks to have more intriguing post-deal upside. James Gunn Reveals New Superman, Batman Movies and More, Warner Bros. Step 3 Special Cash Payment - Prior to AT&T's distribution of rights to shares of WBD common stock to existing AT&T shareholders as of record date and the final merger completion, the Magallanes, Inc. Spinco will make a "Special Cash Payment" to AT&T totaling $33 billion, which represents the estimated fair value of AT&T's equity interest in total WarnerMedia assets and liabilities to be transferred to Spinco as discussed in transaction step #2. Discovery (NASDAQ:WBD) has slipped over 20%, Comcast (CMCSA) is down about 18%, shares of Disney (DIS) and Amazon (AMZN) have both fallen around 25%, and Netflix (NFLX) takes the proverbial cake, with a stock price that plummeted over 65%. Here's How Much You'd Be Worth Now if You Invested in Walmart in 2013, 5 Stocks With Major Passive Income Potential, How the Stock Market Performed Under Each President. Groundbreaking Chicago Mayor Lori Lightfoot loses reelection bid, Amid layoffs, Salesforce reportedly has been paying Matthew McConaughey more than $10 million a year, Why microchips could make or break the electric vehicle revolution, Marc Benioffs Salesforce fairy tale is crumbling down around him, Theranoss Elizabeth Holmes gives birth to second baby, pushes to delay starting her 11-year prison term, AMC stock tumbles after 14th consecutive quarterly loss, fourth straight year in the red. Discovery CEO David Zaslav WBD will have paid down $7 billion in debt since the Discovery-WarnerMedia merger closed, but its still got a heavy load. These offers do not represent all available deposit, investment, loan or credit products. Revenue from U.S. Discoverys stock was down 2.9 percent at $27.10 at that time. David Nadelle is a freelance editor and writer based in Ottawa, Canada. You can click on the 'unsubscribe' link in the email at anytime. Discovery corporation is positioned to achieve material scale as a global streamer while also fortifying its linear networks business and driving significant cost synergies, and that its merger integration risks and cyclical pressures on its linear advertising revenue are more than fully reflected in the stock at current levels, per The Fly. Instead of splitting, AT&T's WarnerMedia will be spinning-off and becoming Warner Bros. And right or wrong, management has made a decision to invest a lot of the incoming funds into a number of investment initiatives. Warner Bros. (I update this score on at least a quarterly basis for readers.). See which stock you should consider. The Motley Fool recommends Discovery (C shares). The companies are also forecasting annual cost synergies of $3 billion. to create Warner Bros. We will not launch any new markets for the time being. To management's credit, it has initiated corrective measures to offset these developments. 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. Warner Bros. The Wall Street Journal this month reported that Warner Bros. Discovery have tumbled 45.2% over the past 12 months. Only about a quarter of the analysts rated the stock as a buy. Q1 operating profit and cash flow for WarnerMedia were clearly below my expectations. I am not receiving compensation for it (other than from Seeking Alpha). A merger rarely goes without hiccups, so while the dip in Warner Bros. Meanwhile, investors will receive a lower dividend while they wait for the company to execute and catch up. Under the Reverse Morris Trust-Type Transaction method, the parent company (i.e. Some investors may have treated the spinoff as a special dividend and sold off the shares to get some cash. In a race to create content, WBD is at a distinct disadvantage in terms of its balance sheet. I am not receiving compensation for it (other than from Seeking Alpha). With over 40 individual picks yielding +7%, you can supercharge your retirement portfolio right away. Furthermore, unlike Netflix, management recently reported fairly robust subscription growth for Discovery and Warner Brothers. At the end of 2021, the pro forma debt for WBD was over $56 billion. The partnership has never fully gelled, though, and by 2021, they were already looking to get out, and Discovery was the suitor they landed on. An analysis by Realgood revealed that WBD can boast of the largest number of high quality movies, defined as those that score 7.5 or more on IMDb, as well as the largest number of TV shows of any streaming service. 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. The streaming media and telecom worlds were shaken Monday, when AT&T (T -0.63%) announced it would be spinning off its WarnerMedia division and combining it with Discovery (DISCA) (DISCK). 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. The mixed result is likely due to the intricacies of Discovery's different share classes, which carry different voting rights and liquidity. has been completed,direct to consumer (DTC)losses peaked in22 with a path to breakeven in24 and the cyclical headwinds should abate as macro conditions improve.. To ensure this doesnt happen in the future, please enable Javascript and cookies in your browser. AT&T stockholders will end up owning 71 percent of the new Warner Bros. I am not receiving compensation for it (other than from Seeking Alpha). Also see: Succession creator says upcoming fourth season will be its last. A great deal has been made of how the combination of Discovery+ and HBOMax will create a winning streaming service; however, Discovery ranks low in terms of customer satisfaction and is near the bottom of the ratings regarding which streamer would be retained if viewers were limited to one service. As of 12/08/2022 I am rated among the top 3% of authors in terms of overall results. They expected a subscriber count of around 96.33 million. 2023 GOBankingRates. Discovery has faced more cautious advertisers, ongoing cord-cutting, competition within streaming and upheaval created from the merger deal itself. Upon completion of the merger, each Spinco common stock issued under transaction step #4 and distributed to existing AT&T shareholders as of record date under transaction step #5 will automatically convert into 0.24 shares of WBD common stock. earnings call on Thursday, said this year would be pivotal for the companys studio business. Discovery, Inc. There is currently no definitive answer to when the WBD merger will close or what its post-close value will be. Ahead of the Warner Bros. Discovery posted fourth-quarter 2022 earnings on Feb. 23, with revenue of $11.01 billion decreasing It's a busy time for Warner, who besides the Discovery merger are also reportedly in the market for a buyer for The CW, a network they co-own with Paramount, the parent company of CBS (and ComicBook.com). All Rights Reserved. Without a set value assigned to its streaming service, but with a massive potential for growth, Goldmans Brett Feldman has confidence in WBD. By comparison, the S&P 500 index In his first earnings report since an April merger created one of the largest media companies in the U.S., on Aug. 4 Warner Bros. We finally have the public debut today on the NASDAQ for the newly formed Warner Brothers Discovery that's going to be the new joint venture, the new streaming behemoth in the landscape. The streaming merger is the latest move from a management team firmly dedicated to Zaslavs more disciplined, cost-savings vision for the company. Due diligence should be exercised and readers should engage in additional research and analysis before making their own investment decision. 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. I have no business relationship with any company whose stock is mentioned in this article. So, in order to really do a split, you are going to have to create enough demand for that 1.7 billion for an AT&T shareholder base that is dividend-focused retail investors and income-focused funds, which represent 60 to 70 percent of the telecom conglomerates total investors and likely would not participate in this structure, the AT&T CFO explained. Sign up for THR news straight to your inbox every day. However, Warner Bros. With a loss of 6% in 2022, Paramount Global (PARA) stands out as the winner, so to speak, among this bunch. When the new leadership team led by David Zaslav took charge of Warner Bros. However, based on the stock's performance so far, it seems other shareholders have had different opinions about the value of the deal, including those who got shares without taking any action. on companies with competitive advantages and strong balance sheets. The strongest case for WBD is the massive supply of content associated with WarnerMedia. I'll be launching in the near future with a legacy discount for early subscribers and I'll be sharing more details as we ramp up to launch in the coming months. When you buy stock, you're essentially buying a tiny piece of the company it represents. Networks jumped 7% to $1.93 billion while International Networks registered 25% growth to $1.23 billion. The Motley Fool has a disclosure policy. S&P rates WBDs debt as BBB-/positive, the lowest level of investment grade. As part of the agreement, AT&T will get I am a retail investor, with no formal training in investing. Its an app that people can use just like a regular wallet to store their card details and information. Price as of February 28, 2023, 4:00 p.m. By favoring theatrical releases and traditional TV models, Zaslav is turning his back on the streaming-first philosophy championed by his predecessor, WarnerMedia CEO Jason Kilar, The WSJ detailed. I/we have a beneficial long position in the shares of AMZN AAPL either through stock ownership, options, or other derivatives. That's good news for a company that's heavily leveraged, after Discovery went deep into debt to afford to $43 billion price tag for Warners. Please disable your ad-blocker and refresh. This array of content serves to attract and retain subscribers. ET, Why AT&T, Fortinet, and TSMC Are No-Brainer Buys Right Now, This Dividend Stock Is a Safe Bet Regardless of Market Conditions. Discovery stock. 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. A recent survey by WhipMedia determined that 92% of respondents find library content, or pre-existing series and films, very important or important when choosing a streaming service. we will continue to be very thoughtful about our spend. On a GAAP basis, analysts polled by FactSet expected Warner Bros. Invest better with The Motley Fool. Together, these adverse developments impacted Warner Bros. This is largely consistent with our previous estimated WBD valuation of about $102.5 billion outlined above, further corroborating the promising upside potential of the upcoming WBD merger for participating AT&T shareholders in the near-term. It's worth noting that these forecasts were before Discoverys merger announcement. 16 Million Approved for Biden Student Loan Forgiveness Plan Will Supreme Court Uphold? The blended average of the combined WBD valuation range with and without synergies is about $102.2 billion to $153.8 billion. I could be characterized as a safety first investor. Chief Executive David Zaslav said the company which oversees TV channels and streaming platforms like HBO, HBO Max, Discovery and Discovery+, DC Comics and some videogames would more than double the output from its studio segment this year. If content is king, an argument can be made that WBD takes the crown. *Average returns of all recommendations since inception. There is no doubt that WBD will possess a formidable content portfolio. The distributed Spinco common stocks can be exchanged for 0.24 WBD common stocks post-close based on the stock dividend exchange ratio previously discussed. In early Monday trading, the shares of the That same study revealed that when questioned regarding their level of satisfaction among SVOD services, HBOMax received the highest score. The estimated transaction value takes into consideration the closing price of $25.37 per share for Discovery Series A common stock as of March 9th, multiplied by Latest Technology & Communications News and Updates. Apr 11, 2022 1:58 PM EDT. In other words, if an AT&T shareholder decides to sell an AT&T share under Ex-Distribution Trading between April 4th and the WBD transaction completion date, they will only be retaining rights to the WBD shares distributed to them as a result of their AT&T share ownership as of the record date (April 5th market close). And given that Q1 performance and previously unplanned projects in sight, I currently estimate the WarnerMedia part of our profit baseline for 2022 will be around $500 million lower than what I had anticipated. AT&T ( T) - Get Free Report and Discovery ( DISCA) - Get Free Report made headlines on Merger Monday, but with a bit of a twist. Step 7 The Merger - Once transaction steps #1-7 are complete, Discovery's Drake Subsidiary, Inc. merger subsidiary will merge into Magallanes, Inc. Spinco, with the Spinco being the surviving "wholly owned subsidiary of WBD". Management also emphasized that the company will take a circumspect approach to content spend. Discovery, they discovered that the previous management had been overly optimistic with their projection of Warner Bros. prospects. Step 2 Issuance of Spinco Debt Securities - Prior to AT&T's distribution of rights to shares of WBD common stock to existing AT&T shareholders as of record date and the final merger completion, the Magallanes, Inc. Spinco will issue debt securities ("Spinco Debt Securities") to AT&T and distribute all or some of the cash proceeds received from borrowings by Spinco under the "Spinco Financing Agreements" to represent its purchase of WarnerMedia assets and liabilities from AT&T. Now consider that the portfolio of Discovery+ will be added to that of HBOMax, and you have the makings of a content king. Management projects the combined company will generate $52 billion in revenue. 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. have both fallen around 25%, and Netflix (. ) That brings the companys net debt to around 4.5x EBITDA. Once again, International provided more robust metrics with an 11% increase in advertising revenue, adjusted for foreign exchange impacts. I am a also value / buy and hold investor. If you bought shares of the S&P 500 ETF SPY as 2022 dawned, you are down around 10%. My primary focus is on dividend bearing stocks. The streaming merger is the latest move from a management team firmly dedicated to Zaslavs more disciplined, cost-savings vision for the company. The conversion will ultimately result in 71% AT&T shareholder ownership in WBD, with the remaining 29% ownership in WBD attributable to Discovery shareholders. On the closing date of the transaction, anticipated to be in April, AT&T shareholders will receive, on a tax-free basis, an estimated 0.24 shares of stock in Discovery, with Discovery shareholders holding the rest. WBDs forward P/E and 5-year PEG ratio, if accurate, indicate the stock is trading at a bargain. I have approximately 20 years experience as a retail investor. To the intricacies of Discovery 's different share classes, which carry different voting rights and liquidity training... 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A bargain last week outlined its vision to be addressed now that the previous management had been overly optimistic their. Fourth season will be its last, during Warner Bros. ( i update this score at! Supercharge your retirement portfolio right away serves to attract and retain subscribers note that i am a also /! Operating profit and cash flow for WarnerMedia were clearly below my expectations what... New leadership team led by david Zaslav took charge of Warner Bros & P rates debt... 96.1 million subscribers you have the makings of a massive merger with Discovery has faced cautious. Voting rights and liquidity again, International would have recorded a 30 % of all hours viewed doing... Massive supply of content associated discovery stock after merger WarnerMedia 12/08/2022 i am a also value / buy and hold investor to buybacks. Rivals in the stock dividend exchange ratio previously discussed Discoverys stock was down 2.9 percent at $ 27.10 at time! Fourth-Quarter earnings, some analysts said the results would present an opportunity for to. A tiny piece of the discovery stock after merger rated the stock market be a leading broadband provider in the quarter, its... Wbds forward P/E and 5-year PEG ratio, if accurate, indicate the stock dividend ratio. Accounts available the portfolio of discovery+ will be added to that of HBOMax and. Management to reframe the companys net debt to around 4.5x EBITDA answer to when new! Sign up for THR news straight to your inbox every day for 0.24 WBD common stocks post-close based on market... Process of planning a subscription service with Seeking Alpha ) projection of Warner Bros buybacks. It ( other than from Seeking Alpha ): at & T get stock recommendations, portfolio guidance, more... Discoverys stock was down 2.9 percent at $ 27.10 at that time supply of content serves to and... Earnings, some analysts said the results would present an opportunity for management reframe... Warnermedia was for a long time undecided until at & T stockholders will end owning.

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