Why Warner Bros. Discovery (WBD) Stock Is Trading Up Today

What Happened?

Shares of global entertainment and media company Warner Bros. Discovery (NASDAQ:WBD) jumped 14.2% in the morning session after it continued the rally from the previous day amid reports that Paramount Skydance was preparing a takeover bid for the company. 

The stock surged nearly 29% in the prior session after The Wall Street Journal reported that Paramount Skydance, backed by the Ellison family, was preparing a majority cash offer. The proposed bid is reportedly for all of Warner Bros. Discovery, including its movie studio and cable networks. Fueling Friday's continued investor optimism, analysts weighed in on the potential deal. Needham & Company noted that a deal could be completed at a price above $16.80 per share and estimated that combining the two media giants could create $3 billion to $4.5 billion in cost synergies.

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What Is The Market Telling Us

Warner Bros. Discovery’s shares are very volatile and have had 23 moves greater than 5% over the last year. But moves this big are rare even for Warner Bros. Discovery and indicate this news significantly impacted the market’s perception of the business.

The previous big move we wrote about was 1 day ago when the stock gained 3.9% on the news that CEO David Zaslav indicated that the company plans to increase subscription prices for its HBO Max streaming service and address password sharing. 

Speaking at the Goldman Sachs Communacopia and Technology conference, Zaslav stated he believes the streaming platform is "way underpriced" for its premium content and sees a "real opportunity" to raise prices over time. In addition to the pricing strategy, the company also unveiled a broader strategic repositioning. This included news that Warner Bros. Discovery has reduced its debt by $20 billion and expects its streaming business to achieve profitability exceeding $1.3 billion this year. The company's studio business is also on track to outperform its initial revenue guidance, signaling a multi-faceted approach to improving financial performance and shareholder value.

Warner Bros. Discovery is up 71.4% since the beginning of the year, and at $18.28 per share, has set a new 52-week high. Investors who bought $1,000 worth of Warner Bros. Discovery’s shares 5 years ago would now be looking at an investment worth $768.83.

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