Shares of media company Warner Bros. Discovery (WBD) gained 10.4% on Thursday after it announced the renewal of a multi-year distribution deal with Charter Communications (CHTR). The new pact comes a year before the previous contract is set to expire, reflecting WBD’s efforts to maintain its market position, particularly after losing the NBA games broadcasting rights.
The agreement is expected to benefit both WBD and Charter. For WBD, it ensures a steady revenue stream and helps address challenges within the video distribution sector. Additionally, the deal is likely to enhance its streaming services, HBO Max and Discovery+, which will be included at no extra cost for Charter’s Spectrum TV Select subscribers.
Meanwhile, Charter’s decision to grant customers access to a broader array of streaming content without extra fees is likely to foster the growth of streaming platforms. This, in turn, is expected to drive increased subscriber growth and higher revenues for Charter.
WBD’s Deal Strengthens Bargaining Power
Investors should know that the deal comes amid a turbulent period in the pay-TV industry. This is highlighted by the recent Disney channel blackout resulting from a dispute between Walt Disney (DIS) and DirecTV.
This agreement is expected to bolster Warner Bros. Discovery’s bargaining power in upcoming negotiations with other distributors such as Comcast (CMCSA) and DirecTV.
Is WBD a Good Buy?
Turning to Wall Street, WBD has a Moderate Buy consensus rating based on 10 Buys, six Holds, and one Sell assigned in the last three months. At $12.50, the average Warner Bros. price target implies 63.2% upside potential. Shares of the company have declined about 13.55% in the past six months.
