Warner Bros. Discovery shares surged by 7% on Tuesday following recommendations from Bank of America (BofA) Global Research analysts on ways to boost shareholder value. The suggested measures include selling parts of the company, merging with a broadcast network, or initiating a strategic spinoff.
Even though Warner Bros. Discovery operates one of the few profitable streaming platforms, its struggling linear TV divisions have dragged the company’s performance down. Since its formation from a merger in 2022, the company’s stock has plummeted by 70%, and a new round of layoffs began this week.
Wall Street analysts are not optimistic about an imminent improvement.
Led by Jessica Reif Ehrlich, BofA analysts stated, “It is becoming increasingly clear that the company, in its current form, is not performing well as a publicly traded entity, and transformative changes are likely needed to unlock the significant value within these assets.”
In their report titled “Is Unbundling the Answer?” the analysts explored all available options for Warner Bros. Discovery.
One option is selling the company, although the analysts noted potential challenges, including a limited pool of interested buyers and regulatory hurdles.
Alternatively, Warner Bros. Discovery could sell valuable assets like CNN, estimated at $6 billion, or Warner Bros. Games, valued at $5.6 billion.
Merging with a broadcast network is another possibility, adding a missing piece to its portfolio. Broadcast networks reach larger audiences, have higher advertising rates, and offer premium sports programming, such as NFL games. Analysts suggested Fox as a potential merger partner.
Combining broadcast, which attracts an older audience, with streaming, which appeals to younger viewers, could increase total viewership.
Lastly, the BofA analysts proposed a strategic spinoff, separating the company’s streaming and studio assets from its linear TV assets. Significant debt would remain with the linear TV company, which could then seek consolidation with other struggling linear media assets.