Warner Brothers Discovery price target raised to $10 from $9 at UBS

UBS raised its price target on Warner Bros. Discovery (WBD) to $10 from $9 while maintaining a Neutral rating, citing expected Q2 improvements in Streaming & Studios profitability and a revised full-year EBITDA decline of 4%. Despite WBD's 55% annual return, UBS remains cautious due to secular challenges and transaction unknowns related to the company's planned split into Streaming & Studios and Global Networks, which also led to a downward revision of 2025 free cash flow estimates. Concurrently, WBD is executing debt tender offers and has secured new executive agreements, while other firms like Benchmark hold a Buy rating ($18 target) on anticipated project success and Bernstein notes progress on the division separation, highlighting mixed analyst views on the company's ongoing restructuring efforts to optimize operations and unlock value.

Analysis

UBS has raised its price target on Warner Brothers Discovery (WBD) to $10.00 from $9.00 while maintaining a Neutral rating, reflecting a mixed but slightly improving outlook. The firm anticipates solid improvement in Streaming & Studios profitability in the second quarter, forecasting revenues of $9.86 billion (1% YoY growth) and EBITDA of $1.91 billion (6% YoY growth). This optimism is tempered, as UBS has lowered its 2025 free cash flow estimate from $4.3 billion to $3.8 billion, attributing the revision to costs associated with debt tenders and transactions. The company's ongoing restructuring, which includes a planned split into Streaming & Studios and Global Networks divisions, is seen as a potential catalyst to unlock asset value. However, UBS remains cautious due to secular challenges in traditional television and significant unknowns regarding the capital structure of the post-split entities. This cautious stance contrasts with Benchmark's Buy rating and $18.00 price target, which is predicated on the success of upcoming content. WBD's active management of its balance sheet is evident through its cash tender offers for outstanding notes, signaling an effort to optimize its capital structure ahead of the reorganization.

Key Decisions for Investors

• Investors should weigh the potential for value creation from the planned corporate split and improving near-term EBITDA against the execution risks and a reduced 2025 free cash flow forecast.
• Monitor the profitability trends in the Streaming & Studios segment versus the top-line pressures on the legacy Networks business, as this divergence is the core thesis behind the restructuring.
• Pay close attention to upcoming announcements regarding the capital structure and financial details of the two separate entities, as this is a key overhang cited by analysts and a potential catalyst for a stock re-rating.
• Given the wide dispersion in analyst price targets, from UBS's $10 to Benchmark's $18, consider if your investment thesis aligns more with a structural value unlock or a content-driven growth story.