Warner Bros. Discovery shares surged by 7% on Tuesday after Bank of America Global Research analysts recommended strategies to boost the company’s shareholder value. Suggestions included selling the company or some of its assets, merging with a broadcast network, and executing a strategic spinoff.
Despite running one of the few profitable streaming platforms, Warner Bros. Discovery has been hindered by its struggling linear TV assets. Since its 2022 merger, the company’s stock has dropped by 70%, and it recently began a new round of layoffs.
Wall Street analysts remain pessimistic about the company’s near-term prospects. Led by Jessica Reif Ehrlich, BofA analysts wrote, “it is becoming increasingly clear that the company, as it is currently constructed, is not working as a publicly traded entity, and transformative changes are likely required to unlock the considerable value embedded within these assets.”
In their report, “Is Unbundling the Answer?” BofA analysts outlined several options for Warner Bros. Discovery. While selling the company is an option, potential buyers and regulatory hurdles could complicate this approach.
The analysts suggested selling off assets like CNN, valued at an estimated $6 billion, or Warner Bros. Games, valued at $5.6 billion. Merging with a broadcast network, an asset currently missing from its portfolio, could also be beneficial. A potential merger with Fox was proposed, as broadcast networks reach large audiences, attract higher advertising revenues, and offer premium sports programming.
Combining broadcast, favored by older audiences, with streaming, preferred by younger viewers, could increase total viewership. Finally, BofA proposed a strategic spinoff, separating the company’s direct-to-consumer (streaming) and studio assets from its linear TV (cable channels) assets. This plan would leave most of the company’s debt with the linear TV assets, possibly paving the way for consolidation with other struggling media companies.