TD Cowen has downgraded Warner Bros. Discovery (NASDAQ:WBD) from Buy to Hold, citing that the stock’s recent surge on acquisition rumors has pushed it far above what the firm considers fair value. The bank maintained its price target of $14 per share.
“Warner Bros. Discovery shares have surged well beyond our $14 price target following last week’s unsubstantiated report that Paramount Skydance may be considering a bid for the company,” TD Cowen analysts said.
“While PSKY may come in with a $20+ bid, we don’t love the risk-reward here given the potential for WBD shares to quickly round-trip to $11-$12 if the bid doesn’t materialize.”
TD Cowen noted that the report on the potential acquisition “lacks concrete details or confirmation from any of the parties involved.”
Analysts added: “Sometimes the best move is to admit you don’t have a particular edge on a situation and move to the sidelines; that is what we are doing here.”
The bank highlighted that a Paramount Skydance takeover of WBD would be “at least as much political as business-related,” noting that regulatory approval would likely follow if a bid were made.
However, the firm flagged remaining obstacles and sees few alternative suitors. “We think the regulatory hurdles for Comcast would be much higher than for PSKY, given Trump’s animosity towards most legacy media companies; the capital commitment required for a deal is probably too much for Sony; and we don’t expect to see other large tech companies choosing to compete with PSKY,” the analysts wrote.
“Given the speculative nature of the current rally and the elevated risk profile at these levels, we are downgrading WBD from Buy (1) to Hold (2) while maintaining our $14 price target,” the note concluded.
Warner Brothers Discovery stock price
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