Market Not Recognizing Value Of Warner Bros. & HBO, According to Wunderlich

In a report published Tuesday, Wunderlich Securities analyst Matthew Harrigan reiterated a Buy rating and $93.00 price target on Time Warner TWX. In the report, Wunderlich Securities noted, "We think that the market does not fairly recognize the value of Warner Bros. and HBO within Buy-rated Time Warner (TWX) although we are more circumspect relative to Turner Entertainment Networks and CNN. WSI has Turner Entertainment Networks at 46% of consolidated entity value, with CNN at just 4%; and Warner Bros. and HBO at well above Street norms 23% and 27% of value." The report continued, "Although we expect an eventual ad market renaissance off better measurement technology and targeting, we are restrained relative to consensus on the Turner valuation given ongoing ratings issues and the proliferation of original serial entertainment content. Tomorrow's transitional Q4 release is apt to feature $165mm+ in restructuring costs within a $511mm 2014E total, although this should drive $500mm in annual savings." Time Warner closed on Monday at $80.54.