Analyst Sees Hope for Warner Bros. Discovery But Flags A Major Risk

Published: January 23, 2025

Analyst Sees Hope for Warner Bros. Discovery But Flags A Major Risk

By Movieguide® Contributor

MoffettNathanson analyst Robert Fishman has some hope for Warner Bros. Discovery but is dropping his rating for Fox Corp.

“The themes of 2025 will in many ways be continuations of the themes of 2024, and for several media companies, that is exactly the problem,” Fishman explained this month. Last year was “one many eagerly sought to turn a page on, but this new chapter ahead may well throw more of the same at weakened players. Linear seems set to continue moving in the same direction it has, and meaningful direct-to-consumer profitability for second- and third-tier players still seems a few years out of reach.”

“After years of operating under these conditions, the room to maneuver for several of these companies is growing perilously thin,” he continued. “If fundamentals deteriorate at a faster-than-expected rate this year, we expect pressure to grow to explore consolidation and other strategic alternatives. The most likely consolidation targets include film studios, streaming services, and, of course, cable networks.”

Fishman has been with MoffettNathanson since 2013 and has a 66.67% success rate.

He notes that WBD previously had a lot of debt, but 2025 looks promising as the company shows more financial stability.

This is “afforded by its latest recent round of significant affiliate fee renewals, as well as continued growth at Max and reduced studio headwinds,” he wrote. Yet, “WBD’s long-term positioning remains unclear. This greater stability sweetens the desirability of the company’s assets and mounting pressure on management to take transformative action could mean WBD will do more than its part to keep M&A bankers busy. For both reasons, we now see significant upside to current equity values.”

Fox seems more of a risk in comparison.

“Fox continues to sit in a unique position despite the challenges of the ecosystem around it, and the company’s fundamental strength along with some M&A speculation has led to a re-rating in the stock price,” the analyst said. “However, we expect investor questions around the sustainability of Fox’s current strong cash flows to likely limit the stock’s upside from these elevated levels.”

Fishman asks of networks and broadcast groups, “How much more can traditional media handle before they are pushed to alternative solutions? The clock is ticking to define what role they have in this new, post-Streaming Wars world. If they can’t do it alone, then they will be forced to do it together…After years of operating under these conditions, the room to maneuver for several of these companies is growing perilously thin.”

Questions or comments? Please write to us here.