TLDR
Warner Bros. Discovery (WBD) stock received a Sell rating from Argus, dropped from Hold.
Shares currently trade at $30.90, approaching the 52-week peak of $30.92.
The spread between WBD’s share price and the $31 Paramount Skydance bid has virtually disappeared.
Analysts project a $0.90 per share loss in 2026, followed by modest $0.07 earnings in 2027.
Direct-to-consumer streaming saw 10% revenue growth, while Networks and Studios segments posted lower earnings.
On Monday, Argus downgraded Warner Bros. Discovery (WBD) stock from Hold to Sell. This rating shift arrives as the entertainment giant’s combination with Paramount Skydance approaches its final stages.
Currently, WBD shares are priced at $30.90, barely below the 52-week peak of $30.92. This valuation hovers just beneath the $31 acquisition offer from Paramount, suggesting minimal potential for additional gains.
Research analyst Joseph Bonner noted that a recent resolution of a multi-jurisdictional antitrust case paved the way for deal completion. He anticipates the transaction will finalize in the near term.
The difference between WBD’s market price and Paramount’s bid has contracted dramatically. Argus believes current shareholders face limited opportunities for further appreciation.
According to InvestingPro analysis, the stock appears overvalued relative to its calculated fair value. Technical indicators, including the RSI metric, suggest the shares have entered overbought levels.
Financial Projections
For 2026, Argus anticipates WBD will post a GAAP loss of $0.90 per share. The forecast calls for a return to profitability in 2027 with earnings of $0.07 per share.
The research firm estimates annual earnings expansion of 6% over the longer term. This projection reflects a combination of momentum in streaming offset by challenges in traditional media businesses.
The company’s direct-to-consumer streaming division generated $3.1 billion in second-quarter revenue, marking a 10% increase. Adjusted EBITDA for streaming operations surged 63% to reach $512 million.
Meanwhile, the Networks division saw adjusted EBITDA decline 5% to $1.45 billion. The Studios segment experienced a more severe 89% drop in EBITDA, falling to only $96 million.
Transaction Status
The Paramount Skydance acquisition is proceeding through its concluding phases. Citigroup plans to commence meetings with debt investors to secure financing for the transaction.
Paramount has entered discussions with California’s top law enforcement official. The company has proposed a $1.5 billion capital commitment in the state as part of regulatory approval efforts.
The Federal Communications Commission granted approval for foreign capital participation in the $110 billion transaction. However, international investors will be restricted from acquiring voting shares.
Benchmark continues to maintain a Hold recommendation on WBD stock throughout the negotiation period. Not all Wall Street observers believe the appreciation potential has been fully exhausted.
Beyond merger-related factors, Argus highlighted additional concerns. These include the ongoing erosion in traditional cable subscription numbers and the company’s failure to retain domestic NBA broadcasting rights.
Year-to-date, WBD stock has advanced approximately 7%. This performance lags behind the broader market’s 12% increase during the identical period.
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