Unbundling still the most likely path from here for Warner: BofA

Investing.com -- Bank of America analysts said that Warner Bros. Discovery (WBD) is “on a path – with certainty – to split the company,” with the separation expected to close in early 2026.

In a note Tuesday, BofA argued that “unbundling appears to be [the] most likely option,” and reiterated a Buy rating while raising its price objective to $24 from $16.

According to BofA, splitting Warner into standalone entities could unlock significant value.

The analysts wrote that “as a standalone entity WBD’s streaming and studio assets would generate a bidding war amongst potential buyers, and therefore, we believe a split of the company can garner the greatest potential value.”

They also said the market continues to “underestimate the Discovery Global business,” pointing to strategic options that could emerge post-split.

Looking ahead to third-quarter earnings, BofA expects “a continuation of strong momentum in Studios and Streaming but continued challenges in linear advertising.”

The analysts highlighted that Warner is benefitting from “strong performance at the box office” and appears positioned to exceed its $2.4 billion studios EBITDA target for 2025.

BofA forecasts 3Q revenue of $9.13 billion, down 5% year-on-year, and adjusted EBITDA of $2.26 billion, down 7%.

For 2025, BofA maintained its adjusted EBITDA estimate of $8.63 billion and free cash flow projection of $3.15 billion.

The analysts also flagged upcoming catalysts, including what they described as the “strongest slate of all studios this year (~28% share of ’25 box office YTD),” as well as potential advertising recovery and further direct-to-consumer growth.

BofA concluded: “We continue to believe WBD has a compelling assortment of assets that could generate significant buyer interest post-split.”

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