Warner Bros. Discovery (WBD) was formed on April 11, when WarnerMedia and Discovery merged their legacy businesses, explains Jim Osman, editor of The Edge Spinoff Report Lite.
The combined Warner Bros. Discovery company has now become the third largest streaming media powerhouse behind Netflix (NFLX) and Disney (DIS).
It's segments are 1) Advertising, Distribution and Content Generation (together contributing 65% to revs in FY23E) and 2) the fast-emerging Subscription (Direct to Consumer) business (contributing 35% to revenues), containing such brands as Discovery, Food Channel, HGTV, TLC, Animal Planet, HBO, CNN, Cartoon Network, Adult Swim, Boomerang, Warner Bros., and many others.
We have now seen insider buying in this situation. Immediately following WBD’s first earnings release on April 26, eight different insiders went into their own pockets and bought shares of WBD at an average of $18.90.
This new catalyst of classic value buying from insiders has prompted us to re-enter and the stock on the long-term synergies and benefits of the merger. Investors are suggested to take a re-look at current levels as well.
Associated with John Malone, Robert Bennett (Director) has a history of making good buys, including buying HP, Inc. (HPQ) in May 2020 (making a +148% return to date vs. the S&P 500 Index's +38%) and Liberty Media Formula One Series A (FWONA) in December 2008 (making a return to date of +1,480%).
CEO David Zaslav holds a targeted compensation of $246.6 million over the next 6 years (through December 2027), with the first tranche being exercisable once it hits $35.65 a share. We see potential upside of 27% as a base case, and a bullish forecast for a 44% gain.
