Warner Bros. Discovery stands to gain from a potential acquisition by Netflix , according to Wells Fargo. The bank stood by its equal-weight rating on the entertainment and media stock, but lifted its price target about 8%, to $14 per share from $13. The updated forecast implies upside of nearly 12% from Warner Bros.’ Wednesday close. Shares of Warner Bros. have jumped 19% this year. The stock was trading 4% higher early Thursday. WBD YTD mountain WBD YTD chart As a catalyst, Wells Fargo analysts led by Steven Cahall see potential buyers interested in Warner Bros. Discovery’s streaming and studios business after its separation from the networks side of the company. Cahall stressed that entertainment studios have tended to consolidate over time and that is likely to continue. “This will be the only large [intellectual property] asset for sale at a time when most studios/streamers have big aspirations,” Cahall wrote. While potential buyers include Amazon , Apple , Comcast and Sony , Cahall noted that Netflix is the “most compelling” buyer. Despite not having relied on acquisitions in the past, Netflix remains the most likely candidate given idiosyncratic difficulties faced by other potential buyers. “We think NFLX is the most compelling buyer, and their investors would support a deal,” the analyst said. “While NFLX has historically not been acquisitive, [streaming and studios’] $12bn in annual content spend + library + 100+ acre studio lot offers a lot. It kickstarts a theatrical IP strategy, quickly scales video games and most importantly provides premium content to members.” The analyst estimated the value of Warner Bros.’ streaming and studios segment at around $65 billion, which could translate into an M & A valuation of more than $21 per share. Another potential bidder may have emerged. The Wall Street Journal reported Thursday, citing sources, that the recently merged Paramount Skydance was preparing a majority cash bid for Warner Brothers. David Ellison, the CEO of Paramount Skydance, is the son of Oracle co-founder Larry Ellison. Wells Fargo’s Cahall had previously posited Paramount as an unlikely bidder. “PSKY could not fund buying S & S w/ the company balance sheet. Its controlling shareholders could, though $65bn is an awfully big check even if the post-acquisition company had a further public equity issuance,” the analyst wrote. “We think another big(ger) deal + complex integration is
