Warner Bros. Discovery cut at KeyBanc amid deal uncertainty

[Warner Bros. Discovery Upfront 2022 - Show]
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Warner Bros. Discovery (NASDAQ:WBD [https://seekingalpha.com/symbol/WBD]) was cut to sector weight from overweight at KeyBanc as the share price may have gotten ahead of itself on speculation of a potential deal with Paramount Skydance (NASDAQ:PSKY [https://seekingalpha.com/symbol/PSKY]).

"We continue to like the fundamental improvement story, though there is likely downside from here if a deal fails to materialize, as the probability-adjusted return from various scenarios seems low." KeyBanc analyst Brandon Nispel wrote in a note on Thursday. "With WBD trading at ~8.3x our 2026 adj. EBITDA, we think the risk/reward is now neutral."

Reports suggesting Paramount Skydance (NASDAQ:PSKY [https://seekingalpha.com/symbol/PSKY]) could bid $22 to $24 a share for WBD seem to be the most likely scenario.

"The potential for a bidding war to drive the stock materially higher, potentially in the mid-$30s to low- $40s, is likely a much lower-probability scenario, in our view," Nispel added. "From our perspective, reports that Zaslav wants a bidding war, believes the stock is worth $40, and scoffs at leaked reports of PSKY's potential $22-$24 offer make us nervous."

Shares of Warner Bros. Discovery fell 1.4% in premarket trading on Friday. The stock has jumped 58% since the WSJ first reported about a potential Paramount Skydance bid [https://seekingalpha.com/news/4494182-warner-bros-discovery-jumps-on-report-paramount-skydance-preparing-offer]earlier this month.

MORE ON WARNER BROS. DISCOVERY, PARAMOUNT SKYDANCE CORPORATION

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* Warner Bros. Discovery: Born By Blunders, The Company Has Figured It Out [https://seekingalpha.com/article/4824852-warner-bros-discovery-born-by-blunders-the-company-has-figured-it-out]
* Paramount: The Monster Lurking Behind The Bid For Warner Bros. Discovery [https://seekingalpha.com/article/4823238-paramount-the-monster-lurking-behind-the-bid-for-warner-bros-discovery]
* Paramount Skydance makes crucial legal chief appointment amid takeover chatter for WBD [https://seekingalpha.com/news/4499315-paramount-skydance-makes-crucial-legal-chief-appointment-amid-takeover-chatter-for-wbd]
* NFL's Goodell wants to renegotiate TV rights with media partners in early 2026 [https://seekingalpha.com/news/4498308-nfls-goodell-wants-to-renegotiate-tv-rights-with-media-partners-in-early-2026]