Just a day after two bullish analyst reports, with one expert touting it as his “favorite media stock,” Warner Bros. Discovery got another Wall Street expression of love on Wednesday as Guggenheim’s Michael Morris upgraded its shares from “neutral” to “buy.”In his report, entitled “Chapter 2: Management Takes Control of the Story,” he highlighted a 12-month stock price target of $16.50, emphasizing that this was “representing 31 percent upside potential.” After tough 2022 for the stock, Warner Bros. Discovery management, led by CEO David Zaslav, is expected to focus this year on showing it is on track for cost savings from the Discovery-WarnerMedia merger that created the company last year, unveiling its combined streaming service and other possible catalysts for its shares.Explained Morris: “We see an attractive narrative for the first half of 2023, with the impact of a recently announced domestic affiliate renewals, strong cost controls and the upcoming launch of a restructured Max product as key catalysts. Cost discipline at direct-to-consumer in particular should bolster confidence in the company’s ability to meet consensus 2023 earnings before interest, taxes, depreciation and amortization (EBITDA) estimates and de-leveraging goals.” Concluded the Wall Street expert: “Given the shares are trading at 5x 2024 estimated EBITDA and 6x 2024 estimated free cash flow, we see the risk-reward as attractive as the year unfolds.”Morris also updated his streaming EBITDA forecasts for Warner Bros. Discovery’s fourth quarter 2022, 2023 and 2024. He now projects a 2023 loss of less than $1.24 billion, better than his previous loss estimate of $1.67 billion. Morris then sees Warner Bros. Discovery’s streaming business turning a profit to the tune of $76 million in 2024, for which he had previously projected a loss of $630 million.As of 10:30 a.m. ET, Warner Bros. Discovery shares were down slightly to 12.43 a share.
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