Why WBD's stock is cruising upon its restructuring announcement

MW Why WBD's stock is cruising upon its restructuring announcement

By Emily Bary

Investors are hopeful that Warner Bros. Discovery may consider spinning off its cable networks or merging them with another company

Investors are reading between the lines and liking what they see as Warner Bros. Discovery Inc. heads for a restructuring.

The media company will take on a new corporate structure with two operating divisions. One will be global linear networks, and the other will house streaming and studios.

On the surface, the announcement doesn't sound too exciting, but Wall Street is hoping it could lead to something bigger down the road. Comcast Corp. $(CMCSA)$ plans to spin off many of its cable networks. Will WBD (WBD) end up doing the same?

"While positioned as an organizational efficiency move, this appears more to be a signal that WBD is interested in M&A or a spinoff similar to [Comcast's]," TD Cowen analyst Doug Creutz said in a note to clients.

Read: Will Comcast's spinoff of some cable networks give the stock the desired bump?

WBD, for its part, said in a release that the move will "enhance clarity and focus," while allowing both divisions increased "optionality to pursue further value-creation opportunities for both divisions in an evolving media landscape."

WBD's stock is up 15.9% in afternoon trading Thursday to lead S&P 500 SPX gainers. Paramount Global's (PARA) stock is up 3.8%, as investors may be anticipating a future move from that company as well.

"This reorganization announcement follows months of some industry speculation about breaking up the company to separate the declining linear networks business from the relatively healthy studio business and the growing streaming business," Creutz wrote. "We note that linear, studio, and streaming were already in separate segments, so in a sense this is more about combining management of studio and streaming than it is about separating linear."

The forthcoming Comcast spinoff could come into play here, he noted, as one possible merger partner for a hypothetical WBD network spinoff might be that unit. He noted that on WBD's latest earnings call, Chief Executive David Zaslav said that the regulatory backdrop could be more conducive to mergers under the incoming Trump administration.

See also: Comcast seen taking 'one step forward, two steps back' in tough broadband market

-Emily Bary

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December 12, 2024 14:07 ET (19:07 GMT)

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