Shares of Warner Bros. Discovery continued to run Tuesday, gaining 5.3% to reach their highest point since early November.
The stock gained 63 cents to $12.24 in midday trading. That’s a leap of nearly 39% since it bottomed out on Dec. 28.
Tuesday’s trading reflected new praise for the company from Bank of America and Goldman Sachs.
Bank of America added the entertainment giant formed in April with the combination of Discovery and Warner Media to its “U.S. 1 List” of the firm’s best investment ideas.
Analyst Jessica Reif Ehrlich reiterated a “buy” rating and $21 price target on the stock, suggesting she believes it will gain another 72% in the next year. She said in a note to clients that the company has an “improving narrative” and echoed sentiments expressed last week by CFO Gunnar Wiedenfels that 2023 will enable the company to reset its trajectory now that the integration and restructuring is mostly in the past and the company is moving to reduce its debt.
“We anticipate ’23 will be the beginning of our growth and deleveraging thesis for WBD,” Reif Ehrlich wrote.
Goldman Sachs named Warner Bros. Discovery its “favorite media stock,” and also pointed to the benefits coming out of the $3.5 billion merger, along with the pending relaunch of its flagship streaming service, which will combine HBO Max and Discovery+. Widenfels confirmed the launch is expected by summer.
Goldman analyst Brett Feldman acknowledged that WBD “confronts many of the challenges facing traditional media companies,” including cord-cutting, macro pressure on advertising and intense streaming competition. But he said the company is “best positioned” to drive growth and ramp up free cash flow as it completes its integration, from which he expects $2 billion in savings this year.
He also pointed to not just the pending launch of the new streaming app but also a new free ad-supported streaming TV offering and a “more robust film slate” coming this year as potential catalysts for the stock.
Even as Feldman said he expects investors to “continue to debate the long-term outlook for traditional media companies,” he added Warner Bros. Discovery is the best pick among its peers.
He kept a “buy” rating and a $21 price target on the stock, another outlook expecting outsized gains. “We continue to remain bullish on the long term potential of WBD and view the current risk/reward as highly attractive,” Feldman wrote.
Wall Street’s support comes on the heals of Warner Bros. Television Group’s new deal with producer Greg Berlanti. The “Riverdale” and “Arrowverse” producer re-signed in a deal that will keep him with the company through 2027.