Warner Bros. Discovery Stock: Why the Downgrade?
KeyBanc downgraded WBD stock, citing high valuation after major year-to-date gains and concerns over demanding acquisition terms surrounding CEO David Zaslav's reported $40/share price target.
- Recent Stock Activity: Shares of Warner Bros Discovery (WBD) dropped 1.4% to $19.5 premarket. This dip follows a substantial rise, as the stock had already climbed 87% year-to-date (YTD) up to its last close.
- The Downgrade: Brokerage firm KeyBanc downgraded the stock from "overweight" to "sector weight". KeyBanc made this move without setting a new price target.
- Valuation Concerns: Analysts believe that the stock’s valuation has "gotten ahead of the fundamentals," largely driven by recent reports of a potential takeover.
- Takeover Uncertainty: KeyBanc has stated they have "no way of knowing" if a deal, possibly with Paramount Skydance (PSKY), will actually happen.
- CEO Demands Cause Concern: KeyBanc is "nervous" about reports suggesting that CEO David Zaslav is pushing for a high price of $40 per share and wants a bidding war.
- Risk of Failure: While the firm likes Warner’s "fundamental improvement story," they warn that if the potential acquisition deal fails to materialize, there is a "likely downside" for the stock.
- Analyst Consensus: Currently, 12 of 27 brokerages rate the stock "buy" or higher, while 15 rate it as a "hold". The median price target among brokerages is $14.