Warner Bros. Discovery shares surged 7% on Tuesday after Bank of America (BofA) Global Research analysts suggested several strategies to boost the company’s shareholder value. These recommendations included selling the company or its assets, merging with a broadcast network, and executing a strategic spinoff.
Despite having one of the few profitable streaming platforms, Warner Bros. Discovery has struggled with its linear TV assets, causing its stock to plummet 70% since the merger that formed the company in 2022. The company also commenced a new round of layoffs this week.
Wall Street analysts are not optimistic about near-term improvements. BofA analysts, led by Jessica Reif Ehrlich, stated, “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 titled “Is Unbundling the Answer?” BofA analysts examined all options for Warner Bros. Discovery.
While selling the company is one possibility, the analysts noted few viable, interested buyers, coupled with potential regulatory hurdles. Another option is selling assets such as CNN, estimated to be worth $6 billion, or Warner Bros. Games, valued at $5.6 billion.
The company could also consider merging with a broadcast network, an asset currently missing from its portfolio. Broadcast networks attract large audiences, command higher advertising rates, and often feature premium sports programming like NFL games. The analysts suggested Fox as a potential merger candidate.
Combining broadcast’s older audience with streaming’s younger demographic could increase overall viewership.
Lastly, BofA proposed a strategic spinoff, separating the company’s direct-to-consumer (streaming) and studio assets from its linear TV assets (cable channels). This strategy would involve Warner Bros. Discovery leaving most of its debt with the remaining linear company, which could then potentially consolidate with struggling linear assets from other media firms.