Benchmark has reaffirmed its Hold recommendation for Warner Bros. Discovery (NASDAQ: WBD), citing ongoing regulatory scrutiny and the company’s elevated debt levels despite a strong year for its stock.
The reassessment comes as Paramount Skydance’s proposed $111 billion merger faces legal challenges in California, where Attorney General Rob Bonta has raised concerns over potential harm to competition and media diversity. Governor Gavin Newsom has signaled a preference for settlement, though Bonta continues to oppose the deal unless Paramount agrees to structural concessions, including divesting cable networks and limiting Warner Bros. Discovery’s influence.
Paramount has sought to address antitrust concerns by committing to at least 30 theatrical releases annually and resisting asset sales that could undermine expected cost savings. However, tensions escalated after Bonta canceled a meeting with Paramount representatives, alleging bad faith following a reported leak of prior discussions. The Wall Street Journal noted that Paramount’s Chief Legal Officer, Makan Delrahim, has not ruled out divesting CNN to resolve the lawsuit.
WBD’s stock, trading at $28.71, remains below its 52-week high of $30 but has surged 137% over the past year. The company’s $32 billion in total debt and a current ratio of 0.78—indicating short-term liquidity constraints—further complicate its position. InvestingPro has flagged WBD as overvalued relative to its fair value, adding to the cautious outlook from Benchmark.
Regulatory progress has been uneven: while the UK government approved the merger at an $81 billion valuation after securing guarantees to protect editorial independence, the California lawsuit remains unresolved. Cinema United has urged both parties to resume negotiations to break the impasse.
Benchmark’s Dan Kurnos maintains a Buy recommendation for Paramount Skydance, contrasting with the Hold stance on WBD as the merger’s outcome and regulatory clarity remain pending.
