Raymond James raises Warner Brothers Discovery stock price target to $22

Raymond James significantly raised its price target on Warner Bros. Discovery (WBD) to $22, citing heightened speculation around a potential majority cash acquisition bid from David Ellison and Paramount Skydance, reportedly in the $22-24 range per share, despite WBD's CEO reportedly seeking $40. This M&A interest, which could involve other major players for WBD's post-split assets, underpins WBD's over 80% year-to-date gains and highlights ongoing consolidation pressures within the media industry, despite regulatory concerns.

Analysis

Raymond James has materially increased its price target for Warner Bros. Discovery (WBD) to $22.00 from $13.00, maintaining an Outperform rating, primarily driven by heightened M&A speculation. The catalyst is a potential majority cash bid from Paramount Skydance, reportedly in the $22-24 per share range, which represents a premium to the current price but remains significantly below WBD CEO David Zaslav's reported desired price of $40. This M&A interest, which has contributed to the stock's over 80% year-to-date gain, is viewed as a strategic move by Paramount to "front-run" other potential bidders ahead of a planned split of WBD. The post-split Streaming and Studios assets are attracting broad interest from a range of major players, including Apollo, Sony, Amazon, Apple, Netflix, and Comcast. However, any potential large-scale media combination faces significant regulatory headwinds, as evidenced by Senator Elizabeth Warren's public criticism of media consolidation.

Key Decisions for Investors

• Investors should weigh the potential upside from a formal acquisition offer against the risk that the stock's over 80% year-to-date gain has already priced in significant speculative value, particularly given the notable gap between the rumored bid and the CEO's target.
• Closely monitor regulatory developments and antitrust commentary, as political opposition to further media consolidation represents a material risk to the completion of any potential merger involving WBD and another major entity.
• Consider the 'sum-of-the-parts' valuation for WBD, as strong interest in its post-split Streaming and Studios assets from a diverse group of suitors could provide a valuation floor or alternative paths to shareholder value, independent of a full takeover by Paramount.