If you smell something burnt this afternoon, then you’re likely smelling the scorched earth strategy rolling off Warner Bros Discovery (WBD) in waves. A lot of news poured out of the company, a combination of short-term tactics and long-term strategy. But it added up to a huge win for investors, as shares were up nearly 7% in Tuesday afternoon’s trading. First, the sad news for employees; a new round of layoffs has begun and in a big way.
Max is getting hit, as well as “…some areas of production, business affairs and finance,” noted a report from Deadline. About the only upside here for employees is that the latest round of layoffs is significantly smaller than the previous line of cuts and will be substantially more targeted.
Warner likely needs the cash because that brings us to the second point. It’s putting together an offer to keep the NBA in the fold. In fact, it’s set to put together an offer that will match Amazon’s (AMZN) own offer, though it’s unclear how well it will work.
A Strategic Position
All of this comes at a crucial time for Warner. Bank of America, led by four-star analyst Jessica Reif Ehrlich, released a new report saying Warner should reconsider strategic options, which generally means strapping a “for sale” sign on your back.
Shares are down around 30% against this time last year—not including the surge seen today, of course—but the Bank of America report notes that the “…current composition as a consolidated public company is not working.” The report recommended “…asset sales, restructuring, and/or mergers…” to “…create more shareholder value vs. the status quo.”
Is Warner Bros Discovery Stock a Good Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on WBD stock based on 10 Buys, six Holds, and one Sell assigned in the past three months, as indicated by the graphic below. After a 35.05% loss in its share price over the past year, the average WBD price target of $12.50 per share implies 57.33% upside potential.
