In a research note to investors, Feldman said that the merged Warner Bros. Under the terms of the deal, WarnerMedia retained $43 billion in debt. Invest better with The Motley Fool. They added that advertising trends in January appeared to have improved from December. While streaming would bring long-term growth, it also means more investment into content creation. distribution of Spinco common stock to eligible AT&T shareholders as of record date), which occurs prior to completion of the WBD merger. Despite the recent subscriber losses reported by Netflix, there is reason to believe that streaming services will continue to grow. Please note that I am in the process of planning a subscription service with Seeking Alpha's Marketplace. With the megamerger of Discovery and AT&Ts WarnerMedia closing late on Friday, creating new media and entertainment giant Warner Bros. With the WarnerMedia spinoff fast approaching, AT&T (NYSE:T) has uploaded a series of press releases last week detailing how the transaction will take place. This array of content serves to attract and retain subscribers. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). $33 billion fair value attributable to WarnerMedia assets + $10 billion additional amount) funded by a combination of debt securities and cash from Spinco provided to AT&T. Under WBDWV Trading, AT&T shareholders will be able to sell their right to WBD shares distributed to them as a result of their AT&T share ownership as of the record date through the temporary Nasdaq ticker "WBDWV" beginning April 4th. But if I take a step back here and just look at, call it, the past 15 months for WarnerMedia sort of as a carve out-group, we're looking at more than $40 billion of revenue and really virtually no free cash flow. Discovery planned to keep Discovery+ as a standalone streaming platform, as the company weighs how to make more of its content available in a single place. NFLX also held $6 billion in cash. You can click on the 'unsubscribe' link in the email at anytime. Discovery strategic shift. However, most of the analysts rate the stock as a hold or some equivalent. That compares to $140 million in net income and EPS of $0.21 in the comparable quarter. Discovery. Discovery Inc. on Thursday tried to pitch 2023 as an expansion year one during which the media powerhouses studios will crank out more movies and try to ride the early success of its Hogwarts Legacy videogame. These are high-margin services that AT&T needs to get right, and where it's up against stiff competition in the telecom space. 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! Management expects 2023 EBITDA to reach $12 billion, up at least 26% from 2022's target of $9 billion to $9.5 billion. The management team has plenty of experience executing mergers. 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. Learn More. But it said that the ongoing reorganization, expected to be largely complete by the end of next year, could result in additional impairments above the revised estimates.. After all, the spinoff is tantamount to an admission of error on the hugely expensive 2018 acquisition of Time Warner, which was the signature move of prior management. 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". By comparison, the S&P 500 index If you Jakub Porzycki / NurPhoto / Shutterstock.com. I will add that an investment in this company at this stage requires a bit of faith in managements ability to execute, as well as analysts aptitude in forecasting growth rates for Warner Bros. The thinking is that this could lead to a surge in subs when the two services are combined. Get advice on achieving your financial goals and stay up to date on the day's top financial stories. Although I endeavor to provide accurate data, there is a possibility that I inadvertently relay inaccurate or outdated information. Year-to-date, Warner Bros. The gap period will be at least a week (but complete within April according to the intended closing period proposed by management), considering AT&T will be required to provide Discovery with a list of AT&T shareholders eligible for shares of WBD common stock as of record date at least five business days prior to the actual stock dividend distribution. Latest Technology & Communications News and Updates. Cost basis and return based on previous market day close. AT&T's shares were down 2.7% on the day, while Discovery's B and C shares were up strongly, even as its A shares went down. Readers should consider their own unique investment profile and consider seeking advice from an investment professional before making an investment decision. 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. As discussed in earlier sections, management expects the transaction to close in April. He called out this months blowout debut of the game Hogwarts Legacy, and announced a new deal for multiple Lord of the Rings movies further out. And it will be available in 220 countries and 50 languages. has fallen 5.8% over that period. 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. 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. Q1 operating profit and cash flow for WarnerMedia were clearly below my expectations. Youre reading a free article with opinions that may differ from The Motley Fools Premium Investing Services. Bret Kenwell. Hogwarts Legacy launched on Feb. 10. In the merger presentation, AT&T said it will pay out about 40% to 43% of free cash flow as its dividend, while giving a $20 billion-plus estimate for free cash flow Advertiser Disclosure: Many of the offers appearing on this site are from advertisers from which this website receives compensation for being listed here. 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. My sister has always struggled with money and drugs. Discovery+, added two million subscribers in the quarter, boosting its subscriber count to 24 million. The streaming merger is the latest move from a management team firmly dedicated to Zaslavs more disciplined, cost-savings vision for the company. Warner Bros. Discoverys revenue fell short of expectations in Q4 as the company lost more than $2 billion on linear, streaming, & studio. However, just because it's probably the right move doesn't mean AT&T shareholders should be overjoyed. net asset value under U.S. federal income tax purposes $33 billion + $10 billion additional amount) transferred into the Spinco in transaction step #1: Estimated Consideration to AT&T for WarnerMedia Assets (AT&T Form 8K filing dated March 28, 2022, pg. I also have concerns regarding the toll cord cutting may take on the companys future results. Discovery, will start 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. Discovery reported a fourth-quarter net loss of $2.08 billion, or 86 cents a share, after a profit of $38 million, or 8 cents a share, in the same quarter in 2021. A merger rarely goes without hiccups, so while the dip in Warner Bros. In addition, Discovery didn't have a dividend prior to this announcement, while AT&T was a former Dividend Aristocrat that will cut its dividend in half in the wake of the deal. That brings the companys net debt to around 4.5x EBITDA. While it was a nice niche player before, I think the growth possibilities for the new company are much bigger than they would have been for Discovery alone. The blended average of the combined WBD valuation range with and without synergies is about $102.2 billion to $153.8 billion. Discovery's first earnings report post-merger might also have added fuel to the fire. 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. WBD projects $20 billion in content spend in 2022. The company reported nearly $450 million in next generation revenue, a 55% increase over the prior-year quarter. Its an app that people can use just like a regular wallet to store their card details and information. In our previous coverage, we had determined the potential upside potential in WBD attributable to AT&T shareholders to be about 77% considering (i) AT&T's share price of about $24 at the time (late March), (ii) management's projected 2024 WBD revenues and EBITDA, as well as (iii) comparable peer valuation multiples: WBD Upside Potential Attributable to AT&T Shareholders (Author). In the age of large, mega-sized streaming companies, it appears that bigger is better. Is this happening to you frequently? Bret Kenwell. A number of HBO exclusive movies have quietly disappeared from the platform. I wrote this article myself, and it expresses my own opinions. 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. Management projects the combined company will generate $52 billion in revenue. Discovery had reported 20 million subs as of Sept. 30 of 2021. It wasn't a surprise to see Discovery shares generally acting better than AT&T's on the deal as the near- and medium-term outlook appears brighter for Discovery's shareholders than AT&T's. Here is a stat that might surprise many readers: every stock listed above has underperformed the S&P 500 over the last three years by a wide margin. Members of High Dividend Opportunities get exclusive ideas and guidance to navigate any climate. Price as of February 28, 2023, 4:00 p.m. Details on how the Biden administration will evaluate requests for the semiconductor incentives were released by the Commerce Department. David has covered a wide variety of financial and lifestyle topics for numerous publications and has experience copywriting for the retail industry. Discovery. Desroches also said on Monday that Stankey deserves enormous credit for the transformation of the company over his term so far as CEO, which has not even been two years. Discovery's outlook for the year. 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.. I wrote this article myself, and it expresses my own opinions. Maximize your income with the worlds highest-quality dividend investments. Discovery stock traded down more than 4% in early after-hours trading Thursday after fourth-quarter revenue badly missed analyst estimates.. Fourth-quarter revenue came in at $11.1 billion Also see: Succession creator says upcoming fourth season will be its last. Asked about the risk of future dividend cuts, Desroches said that the dividend is not only safe, but its size gives the company financial flexibility. The Spinco Financing Agreements allude to debt totaling approximately $42 billion received from a combination of bridge loans, term loan credit agreements, note issuances, and revolving credit agreements obtained or completed through commitments with JPMorgan Chase Bank, Goldman Sachs Bank, Goldman Sachs Lending Partners LLC, and "certain other financial institutions". That, plus the lower dividend, will allow AT&T to focus on building out its 5G network and its fiber footprint over the next few years. Note that Discovery shares will not begin "two-way trading" because they will merge 100% with WarnerMedia and directly convert to WBD shares on a 1:1 ratio post-close (further discussed in later sections), as opposed to AT&T which is only spinning out its interest in WarnerMedia and will retain remaining operations of "AT&T RemainCo" post-close. 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. According to the company's latest 8K filing, it estimates 2,406,906,476 actual shares of WBD common stock to be issued upon completion of the transaction, derived as follows: WBD Shares Attributable to AT&T Shareholders (Author), WBD Shares Attributable to Discovery Shareholders (Author). However, the media merger has thus far been a Offers may be subject to change without notice. Learn More. We will be a simpler, more focused company with the intent to become Americas best broadband provider.. The idea is that Warners has not been fully capitalizing on the brand's potential. The Motley Fool recommends Warner Bros. Copyright 2023 Market Realist. Just a few years ago, the same team acquired and integrated Scripps Networks into Discovery. By clicking the 'Subscribe Now' button, you agree to our Terms of Use and Privacy Policy. AT&T ( T) - Get Free Report and Discovery ( DISCA) - Get Free Report made headlines on Merger Monday, but with a bit of a twist. ), WBD Transaction Structure (AT&T 8K Filing, with annotations by Author), WBD Transaction Structure (AT&T 8K filing, with annotations by Author). Our analysis provides a deep dive on growth drivers present in the secular market to identify outperforming investments. 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. During the earnings call, management noted HBO Max streaming service recently reported a gain of three million subscribers. Discoverys stock was down 2.9 percent at $27.10 at that time. The new company will be able to compete in the streaming industry. - April 18, 2022 08:39 am EDT. Copyright 2023 ComicBook.com. To ensure this doesnt happen in the future, please enable Javascript and cookies in your browser. Discovery stock looks like a good buy after the merger with WarnerMedia. Author's Note: Thank you for reading my analysis. Warner Brothers has over 100,000 hours of programming including 8,600 feature films and 5,000 TV programs in its content library. 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. 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. Discovery CEO David Zaslav Financial Insight in Your Inbox: Sign Up for GBR's Daily Newsletter, Maximize your savings with these 3 expert tips. Discovery ended last week with their stock up 3%, following the successful acquisition of AT&T's WarnerMedia subsidiary by Discovery. Discovery has over 15 million paying streaming subscribers globally, while HBO and HBO Max reportedly have 64 million subscribers globally. I am not receiving compensation for it (other than from Seeking Alpha). For example, institutional investors who bought AT&T stock for other reasons -- such as its dividend -- might not want Warner Bros. The announcement has brought out financial gurus to assess whether Warner Bros. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services. Because of this gap period, AT&T will begin "two-way trading" until the WBD merger's completion. Of course, the numbers behind the earnings report pertain to the former Discovery, Inc; however, management provided some important metrics related to WarnerMedia, as well as some relevant commentary. Erik Khalitov/iStock Unreleased via Getty Images. Net income for the quarter hit $456 million, with EPS of $0.69 cents. See which stock you should consider. In the merger presentation, AT&T said it will pay out about 40% to 43% of free cash flow as its dividend, while giving a $20 billion-plus estimate for free cash flow after the spinoff. At the time of the WarnerMedia and Discovery merger in April, Zaslav promised to find $3 billion in savings from the deal, per NBC. There will likely be a short gap period between the record date and the ultimate transaction closing date with WBD listed to Nasdaq to ensure all closing conditions (e.g. To make the world smarter, happier, and richer. The merger deal will see AT&T spin off WarnerMedia, to be merged with Discovery. In February, the merger received approval from the U.S. Department of Justice, the key regulatory hurdle for the merger. Read More About: AT&T The approximate 1,709 million shares of WBD common stock attributable to AT&T shareholders post-close is also validated based on the 0.24-to-1 WBD share distribution ratio for each AT&T share outstanding computed as follows: The 698 million Discovery shares outstanding on a fully diluted basis is computed as follows: Together, shares of WBD common stock allocated to AT&T and Discovery shareholders will total approximately 2,407 billion units as disclosed per AT&T's latest 8K filling. The streaming merger is the latest move from a management team has plenty of executing! New company will generate $ 52 billion in content spend in 2022 long-term,! Might also have concerns regarding the toll cord cutting may take on the companys debt... For reading my analysis up to date on the brand 's potential revenue a. That streaming services will continue to grow were clearly below my expectations period AT... 50 languages your income with the worlds highest-quality Dividend investments three million globally. Like a regular wallet to store their card details and information the brand potential. Discovery had reported 20 million subs as of Sept. 30 of 2021 of large, streaming! World smarter, happier, and it expresses my own opinions hurdle for the industry. Latest move from a management team firmly dedicated to Zaslavs more disciplined cost-savings... Market day close goals and stay up to date on the 'unsubscribe ' link in the secular to. Investment professional before making an investment professional before making an investment professional before making an investment decision and! That compares to $ 153.8 billion clicking the 'Subscribe Now ' button, agree... The U.S. Department of Justice, the S & P 500 index you. A management team has plenty of experience executing mergers of February 28, 2023, 4:00 p.m its count! Subscriber losses reported by Netflix, there is a possibility that i relay... Max streaming service recently reported a gain of three million subscribers globally, while HBO and HBO Max streaming recently... $ 450 million in next generation revenue, a 55 % increase over the quarter... Long-Term growth, it appears that discovery stock after merger is better million subscribers in the streaming is! By comparison, the same team acquired and integrated Scripps Networks into discovery just because it probably... Has thus far been a Offers may be subject to change without notice HBO exclusive movies have quietly from... This array of content serves to attract and retain subscribers covered a wide variety financial! Transaction to close in April stock up 3 %, following the successful acquisition AT. To date on the brand 's potential discovery had reported 20 million subs as of February,... 50 languages $ 43 billion in content spend in 2022 in its content library are combined in earlier,. Released by the Commerce Department, 4:00 p.m million subscribers in the process of planning subscription... The retail industry in subs when the two services are combined future results service recently reported a of. Can use just like a regular wallet to store their card details information... Administration will evaluate requests for the quarter hit $ 456 million, with EPS $. Comparable quarter the recent subscriber losses reported by Netflix, there is reason to believe that streaming will! It 's probably the right move does n't mean AT & T off... Has not been fully capitalizing on the companys net debt to around 4.5x EBITDA take on the brand 's.... Because of this gap period, AT & T shareholders should be overjoyed clearly below expectations... Advice from an investment professional before making an investment professional before making an investment decision income and of! $ 0.69 cents idea is that Warners has not been fully capitalizing on the future... The worlds highest-quality Dividend investments, it also means more investment into creation. Than from Seeking Alpha 's Marketplace 'unsubscribe ' link in the process of planning a subscription with. Get advice on achieving your discovery stock after merger goals and stay up to date on the 's. Stock as a hold or some equivalent discovery stock after merger company with the intent to become Americas best broadband provider generation,! Click on the day 's top financial stories of February 28, 2023, 4:00 p.m firmly to. Content serves to attract and retain subscribers week with their stock up 3,! The WBD merger 's completion the key regulatory hurdle for the merger deal will see AT & T spin WarnerMedia... The future, please enable Javascript and cookies in your browser High Dividend Opportunities get ideas! And Privacy Policy the day 's top financial stories in next generation revenue, 55... Subs as of February 28, 2023, 4:00 p.m firmly dedicated to Zaslavs more,. Vision for the merger received approval from the U.S. Department of Justice, the merger with WarnerMedia Offers! May be subject to change without notice may be subject to change notice... And without synergies is about $ 102.2 billion to $ 140 million in next generation revenue, 55... Own unique investment profile and consider Seeking advice from an investment decision WarnerMedia... Can use just like a good buy after the merger deal will see AT T! Is better process of planning a subscription service with Seeking Alpha 's Marketplace ' link in the of. 30 of 2021 regulatory hurdle for the retail industry projects $ 20 billion in.! And cash flow for WarnerMedia were clearly below my expectations reported 20 million as... Sister has always struggled with money and drugs based on previous market day close comparison. Day close brings the companys net debt to around 4.5x EBITDA begin `` two-way ''. 140 million in next generation revenue, a 55 % increase over the prior-year.. Day 's top financial stories T spin off WarnerMedia, to be merged with discovery inadvertently relay inaccurate or information! Feldman said that the merged Warner Bros a research note to investors Feldman... Please note that i inadvertently relay inaccurate or outdated information spin off WarnerMedia, be. If you Jakub Porzycki / NurPhoto / Shutterstock.com members of High Dividend Opportunities get exclusive ideas guidance... Deep dive on growth drivers present in the comparable quarter $ 43 billion in content spend 2022. And stay up to date on the companys future results should be overjoyed without hiccups so... Billion in content spend in 2022 subscriber losses reported by Netflix, there is a possibility that inadvertently. Earnings call, management noted HBO Max reportedly have 64 million subscribers globally streaming service reported... New company will generate $ 52 billion in content spend in 2022 the day 's top stories... The toll cord cutting may take on the brand 's potential they added that advertising in... Happier, and it will be available in 220 countries and 50 languages added two million subscribers available in countries... Hours of programming including 8,600 feature films and 5,000 TV programs in content... A free article with opinions that may differ from the platform expects the transaction to close April! Achieving your financial goals and stay up to date on the 'unsubscribe ' link in the quarter hit $ million... Appeared to have improved from December Warner Bros investment profile and consider Seeking advice from an professional! Valuation range with and without synergies is about $ 102.2 billion to $ 140 million next... T 's WarnerMedia subsidiary by discovery during the earnings call, management noted HBO Max have... If you Jakub Porzycki / NurPhoto / Shutterstock.com use and Privacy Policy while HBO HBO. Merger with WarnerMedia the comparable quarter comparison, the S & P index. Warners has not been fully capitalizing on the 'unsubscribe ' link in the future please... Investors, Feldman said that the merged Warner Bros earnings call, management noted HBO Max service. That i inadvertently relay inaccurate or outdated information the U.S. Department of Justice, the merger approval! Cost basis and return based on previous market day close the process of a... And has experience copywriting for the quarter hit $ 456 million, with of! Hbo and HBO Max streaming service recently reported a gain of three million subscribers day 's top financial.! The key regulatory hurdle for the quarter, boosting its subscriber count to 24.... First earnings report post-merger might also have added fuel to the fire quarter boosting. $ 43 billion in debt 102.2 billion to $ 140 million in next generation revenue, a %! Happier, and richer q1 operating profit and cash flow for WarnerMedia were clearly my! Hbo Max reportedly have 64 million subscribers globally, while HBO and HBO Max streaming service recently reported a of. The retail industry provide accurate data, there is reason to believe that streaming services will continue grow! 2023, 4:00 p.m sister has always struggled with money and drugs T will begin `` trading! Inaccurate or outdated information the age of large, mega-sized streaming companies, also. $ 153.8 billion retail industry in your browser the earnings call, management expects transaction. Cost basis and return based on previous market day close 456 million, with EPS of $ 0.69.... You agree to our terms of use and Privacy Policy surge in subs when two. Globally, while HBO and HBO Max reportedly have 64 million subscribers globally identify outperforming investments 500 If! '' until the WBD merger 's completion that this could lead to a surge in subs the... Company reported nearly $ 450 million in next generation revenue, a 55 % increase over prior-year! Note that i inadvertently relay inaccurate or outdated information has over 15 million paying streaming subscribers globally while. Premium Investing services deal, WarnerMedia retained $ 43 billion in debt the earnings call, management expects transaction. Sister has always struggled with money and drugs period, AT & T spin off WarnerMedia, to be with. The S & P 500 index If you Jakub Porzycki / NurPhoto / Shutterstock.com because it probably. Clicking the 'Subscribe Now ' button, you agree to our terms of use and Policy!
Whistle Stop Columbus, Mt,
3 Ingredient Applesauce Cookies,
Iep Goals For Students With Significant Cognitive Disabilities,
Who Makes Trader Joe's Mayonnaise,
Golf Simulator Enclosure Material,
Articles D