Goldman Sachs Predicts Strong Growth for Warner Bros. Discovery

Analyst Brett Feldman Recommends Buying Warner Bros. Discovery

Goldman Sachs analyst Brett Feldman believes that Warner Bros. Discovery has significant potential for growth. Despite reducing his price target by $1, Feldman still expects the company’s shares to surge by 62.5% over the next year. Feldman considers Warner Bros. Discovery as the top pick in its industry and has given it a buy rating. In a note to clients, Feldman stated that the company’s risk/reward profile is more attractive compared to its competitors due to several key factors that are mostly within the company’s control.

Media Companies Face Challenges in the Current Landscape

Feldman also expects media companies to continue facing challenges in the current landscape. Linear affiliate revenues are under pressure due to the increasing popularity of cord cutting, and cyclical advertising is still struggling despite some areas of improvement. In addition, the ongoing writers and actors strike further adds to the uncertainty. Feldman prefers media stocks driven by company-specific execution rather than relying solely on secular trends.

Positive Signs for Warner Bros. Discovery

Feldman highlights several positive signs for Warner Bros. Discovery. The company has repaid over $1 billion of debt, indicating strong free cash flows. This suggests that the company is ahead of its free cash flow target for the first half of 2023. Additionally, Warner Bros. Discovery’s balance sheet is expected to meet expectations for the year, providing further upside potential. However, Feldman has revised down revenue and EBITDA forecasts for 2023 and 2024, considering factors such as linear subscriber estimates, advertising recovery expectations, and box office performance.

Challenges Ahead for Warner Bros. Discovery

Warner Bros. Discovery faces challenges in terms of subscriber growth and international expansion. The company experienced a 4-million subscriber overlap between its streaming platforms, Discovery+ and Max. Additionally, muted international growth is expected before the launch of Max in Latin America. Feldman also notes underperformance in the studio division as a reason for lowering his price target.

Overall, Goldman Sachs remains positive on Warner Bros. Discovery and sees it as a strong investment opportunity in the media industry.