Warner Bros. Discovery (WBD) is considering a restructuring that could involve splitting the company into two separate entities, the Financial Times reported. With this move, CEO David Zaslav seeks to boost WBD’s declining stock price. Over the past year, WBD stock has been down about 35%.
It’s important to mention that WBD has not yet reached a final decision. It is also exploring other possibilities like asset sales and mergers. Additionally, WBD has been in the news for its recent announcement of layoffs, aimed at improving cash flow.
Potential Break-Up on the Table
One option under consideration involves spinning off the Warner Bros. movie studio and the Max streaming service into a separate company. This new entity would be largely free of WBD’s current $39 billion debt burden, potentially resulting in a higher market valuation.
The remaining company would focus on WBD’s traditional television networks and retain the majority of the debt.
WBD’s Challenges
The restructuring talks come amid several challenges that continue to impact the performance of media companies.
These include stiff competition in the streaming space and high content creation costs. Apart from these, WBD’s legacy television networks are witnessing lower revenue, thereby putting pressure on bottom-line growth.
Is WBD a Good Buy?
The stock has a Moderate Buy consensus rating on TipRanks based on 10 Buy, six Hold, and one Sell recommendations. The analysts’ average price target on WBD stock is $12.50, implying a 50.2% upside potential from current levels.
