have both fallen around 25%, and Netflix (. ) Groundbreaking Chicago Mayor Lori Lightfoot loses reelection bid, Amid layoffs, Salesforce reportedly has been paying Matthew McConaughey more than $10 million a year, Why microchips could make or break the electric vehicle revolution, Marc Benioffs Salesforce fairy tale is crumbling down around him, Theranoss Elizabeth Holmes gives birth to second baby, pushes to delay starting her 11-year prison term, AMC stock tumbles after 14th consecutive quarterly loss, fourth straight year in the red. After the next few quarters, investors will have a better sense of how things are playing out and whether the stock is one to hold onto. We feel really good about where we are.. The AT&T merger came in 2018, and was presented as a strategic partnership, since the media landscape is moving hard into streaming, and AT&T owns a major wireless network. Networks jumped 7% to $1.93 billion while International Networks registered 25% growth to $1.23 billion. Discovery to report a loss of 35 cents a share, on revenue of $11.2 billion. The management team has plenty of experience executing mergers. Management discussed a number of concerns to be addressed now that the merger is complete. One of the analysts rates WBD as a sell. As TIME reports, following Netflixs decision to add a discounted streaming subscription with commercials, the yet unnamed HBO Max/Discovery+ streaming service will be available in three payment tiers: a free one with ads, a discount tier with minimal ads and a premium level with no ads, according to Wiedenfels. Warner Bros. Discoverys revenue fell short of expectations in Q4 as the company lost more than $2 billion on linear, streaming, & studio. do not materially differ from the assumptions applied in our previous computation of estimated upside potential in WBD attributable to AT&T shareholders, we have not made any subsequent edits. Q1 operating profit and cash flow for WarnerMedia were clearly below my expectations. The new entity will focus on streaming services. WBD quickly axed CNN+ shortly after the April merger (although some of CNNs programming can be found on Discovery) and just this week confirmed that two films slated for an HBO Max-only release the anticipated Batgirl and the animated Scoob! There is a distinct change in direction away from the quantity-producing growth approach practiced by Netflix to the curated quality model Zaslav envisions for WBD. AT&T and Discovery on Monday announced that they will merge their media assets in a megadeal that creates a stronger rival to Walt Disney and Netflix amid global Since I require a discount in the share valuations of my investments, my ratings are generally very conservative. Discovery Inc. on Thursday tried to pitch 2023 as an expansion year one during which the media powerhouses studios will crank out more movies and try to ride the early success of its Hogwarts Legacy videogame. Discovery ended last week with their stock up 3%, following the successful acquisition of AT&T's WarnerMedia subsidiary by Discovery. Author's Note: Thank you for reading my analysis. The company previously expected $3 billion in annual run-rate synergies from the merger, but during the last earnings call, CFO Wiedenfels stated the $3 billion target might be conservative. Copyright 2023 Market Realist. AT&T and Discovery sound optimistic about the new company's outlook. Could AT&T Stock Beat the Market in 2023? His clients may own shares of the companies mentioned. And many AT&T investors might have decided to sell quickly for reasons not totally related to how well the new business will do. Discovery had reported 20 million subs as of Sept. 30 of 2021. The company posted FCF of $238 million, and operating expenses decreased 8% to $907 million. The companies are also forecasting annual cost synergies of $3 billion. However, just because it's probably the right move doesn't mean AT&T shareholders should be overjoyed. However, most of the analysts rate the stock as a hold or some equivalent. In a filing in December, Warner Bros. Bret Kenwell. AT&T shares fell in pre-market trading and were down 4.3 percent to $24.40 as of 7:45 a.m. Asked about the risk of future dividend cuts, Desroches said that the dividend is not only safe, but its size gives the company financial flexibility. Discovery merger, AT&T and Discovery Communications shareholders have decisions to make. has been completed,direct to consumer (DTC)losses peaked in22 with a path to breakeven in24 and the cyclical headwinds should abate as macro conditions improve.. Discovery. Essentially, AT&T will transfer 100% of its owned WarnerMedia assets into the Magallane, Inc. Spinco prior to the completion of the transaction. The Spinco Financing Agreements allude to debt totaling approximately $42 billion received from a combination of bridge loans, term loan credit agreements, note issuances, and revolving credit agreements obtained or completed through commitments with JPMorgan Chase Bank, Goldman Sachs Bank, Goldman Sachs Lending Partners LLC, and "certain other financial institutions". AT&T is also still behind competitors in 5G deployment, and is up against stiff competition in the fiber broadband space. The streaming media and telecom worlds were shaken Monday, when AT&T (T -0.63%) announced it would be spinning off its WarnerMedia division and combining it with Discovery (DISCA) (DISCK). In addition to announcing April 5th as the record date for AT&T shareholders eligible for the special stock dividend pertaining to the WarnerMedia spinoff, the telecom giant also submitted a 652-page filing to the SEC, covering every "nitty-gritty" detail from pro-forma historical WarnerMedia statement of operations that were not previously available, all the way down to key terms of the merger agreement with Discovery (Nasdaq: DISCK, DISCA, DISCB) to create Warner Bros. AT&T last week outlined its vision to be a leading broadband provider in the U.S. following the WarnerMedia transaction. Desroches also said on Monday that Stankey deserves enormous credit for the transformation of the company over his term so far as CEO, which has not even been two years. I have approximately 20 years experience as a retail investor. At the time Sign up for our daily newsletter for the latest financial news and trending topics. net asset value under U.S. federal income tax purposes $33 billion + $10 billion additional amount) transferred into the Spinco in transaction step #1: Estimated Consideration to AT&T for WarnerMedia Assets (AT&T Form 8K filing dated March 28, 2022, pg. The company finished the quarter with 96.1 million subscribers. A merger rarely goes without hiccups, so while the dip in Warner Bros. After a financial scandal tarnished the Kinney brand, they became Warner Communications in 1972. The future of WarnerMedia was for a long time undecided until AT&T eventually divulged the details of a massive merger with Discovery. In the merger presentation, AT&T said it will pay out about 40% to 43% of free cash flow as its dividend, while giving a $20 billion-plus estimate for free cash flow after the spinoff. Get advice on achieving your financial goals and stay up to date on the day's top financial stories. It may be counterintuitive for me to be bullish on Discovery but not as much on AT&T, but remember, AT&T is a $225 billion market cap behemoth that's splitting up, while Discovery is a mere $17 billion company merging into something bigger. Discovery, Wall Street is turning its attention to the outlook for the new conglomerates stock that began trading on Monday under the ticker symbol WBD.. Discovery a Buy? -2.01% NFLX also held $6 billion in cash. Discovery has faced more cautious advertisers, ongoing cord-cutting, competition within streaming and upheaval created from the merger deal itself. Warner Bros. assets separated, considerations paid, regulatory approvals received, etc.) I am a retired law enforcement officer. Upon closing, Magallane, Inc. Spinco will merge with "Drake Subsidiary, Inc.", the wholly owned "merger subsidiary" of Discovery's to create WBD. Due diligence should be exercised and readers should engage in additional research and analysis before making their own investment decision. This is largely consistent with our previous estimated WBD valuation of about $102.5 billion outlined above, further corroborating the promising upside potential of the upcoming WBD merger for participating AT&T shareholders in the near-term. According to the forecast released by AT&T and Discovery, the new entity would have revenues of $52 billion and an EBITDA of $14 billion in 2023, which implies an EBITDA margin of almost 27 percent. We currently are holding a limited-time sale with 10% off your first year! As of Aug. 5, MarketBeat lists Warner Bros. Step 2 Issuance of Spinco Debt Securities - Prior to AT&T's distribution of rights to shares of WBD common stock to existing AT&T shareholders as of record date and the final merger completion, the Magallanes, Inc. Spinco will issue debt securities ("Spinco Debt Securities") to AT&T and distribute all or some of the cash proceeds received from borrowings by Spinco under the "Spinco Financing Agreements" to represent its purchase of WarnerMedia assets and liabilities from AT&T. Discovery reported a fourth-quarter net loss of $2.08 billion, or 86 cents a share, after a profit of $38 million, or 8 cents a share, in the same quarter in 2021. SPX, Warner bros bring sold to Discovery? with the stock up over 60% year to date, reversing losses from 2022 Readers should consider their own unique investment profile and consider seeking advice from an investment professional before making an investment decision. The Motley Fool has a disclosure policy. WBD currently trades for $18.88 a share. Last week, AT&T confirmed April 5th at market close as the record date for the stock dividend related to the WarnerMedia spinoff. A merger rarely goes without hiccups, so while the dip in Warner Bros. We will be a simpler, more focused company with the intent to become Americas best broadband provider.. To balance that debt, at the end of 2021, WBD had a bit over $4.1 billion in cash. James Gunn Reveals New Superman, Batman Movies and More, Warner Bros. Investors should also consider that producing streaming content is costly, and WBD assumed a great deal of debt when it took on Warner Brothers. Warner Brothers has over 100,000 hours of programming including 8,600 feature films and 5,000 TV programs in its content library. And given that Q1 performance and previously unplanned projects in sight, I currently estimate the WarnerMedia part of our profit baseline for 2022 will be around $500 million lower than what I had anticipated. takes the proverbial cake, with a stock price that plummeted over 65%. If you have an ad-blocker enabled you may be blocked from proceeding. The new streaming behemoth will have a huge library of 200,000-plus hours of content, from Warner Bros. Studios, HBO and MBO Max, The Turner channels (TNT, TBS, CNN), as well as Discovery's comprehensive portfolio of unscripted content. Learn More. With the 5G transition in full swing, the company can't afford to be distracted with the streaming media wars, paying down debt, and maintaining the dividend all at once. Its an app that people can use just like a regular wallet to store their card details and information. The Motley Fool has a disclosure policy. After all, there has been a more chaotic revolving door over in the HBO C-suite since the merger with AT&T, with lots of turnover and restructuring. Discovery stock. Discovery was word that DC could be restructured. But if I take a step back here and just look at, call it, the past 15 months for WarnerMedia sort of as a carve out-group, we're looking at more than $40 billion of revenue and really virtually no free cash flow. In other words, if an AT&T shareholder decides to sell an AT&T share under Ex-Distribution Trading between April 4th and the WBD transaction completion date, they will only be retaining rights to the WBD shares distributed to them as a result of their AT&T share ownership as of the record date (April 5th market close). See which stock you should consider. The combination of issued Spinco Debt Securities and cash proceeds from Spinco Financing Agreements provided to AT&T as part of transaction step #2 must total $43 billion, which represents the total consideration paid by Spinco to AT&T in exchange for its equity interests in the assets and liabilities of WarnerMedia (i.e. Discovery, Inc. The company reported nearly $450 million in next generation revenue, a 55% increase over the prior-year quarter. With the WarnerMedia spinoff fast approaching, AT&T (NYSE:T) has uploaded a series of press releases last week detailing how the transaction will take place. 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