Benchmark Securities maintained its Hold rating on Warner Brothers Discovery (NASDAQ: WBD) at $28.71, citing valuation concerns despite a 137% surge over the past year and a 52-week high of $30. The stock is viewed as overvalued relative to its fair value by InvestingPro analysis.
The rating comes as Paramount Skydance’s proposed $111 billion merger with Warner Bros. Discovery faces regulatory and legal challenges. In the U.K., the government approved Paramount’s $81 billion acquisition of Warner Bros. Discovery after securing commitments to protect editorial independence.
In California, Attorney General Rob Bonta has escalated antitrust scrutiny, canceling a meeting with Paramount representatives and accusing the company of bad faith following leaks from prior discussions. Bonta, aligning closer with Governor Gavin Newsom’s stance, continues to oppose the merger on competition and media diversity grounds. Key demands include the divestiture of multiple cable networks and ensuring Warner Bros. remains a stand-alone entity with minimal interference from David Ellison.
Paramount has resisted structural changes that could limit cost savings, committing to at least 30 annual theatrical releases. Reports suggest the company may consider divesting CNN to address antitrust concerns, though it remains unclear if CNN is explicitly targeted in the divestiture demands.
Warner Brothers Discovery’s financial position remains under pressure, with total debt of $32 billion and a current ratio of 0.78, as short-term obligations exceed liquid assets. Cable networks remain critical to free cash flow generation despite challenges from cord-cutting and declining advertising revenue.
Cinema United has urged both the California Attorney General and Paramount to engage in discussions to resolve the legal challenge, emphasizing the broader impact on the theatrical exhibition industry.
