Market Overview

This Time Warner Analyst Isn't Concerned By DoJ Challenge Of AT&T Deal

This Time Warner Analyst Isn't Concerned By DoJ Challenge Of AT&T Deal
Related T
Upcoming Earnings: Video Streaming Giant Netflix To Report After The Bell Thursday
Jim Cramer Weighs In On Twitter, Deutsche Bank And More
AT&T: Buy For Steady Income And Potential Streaming Growth (Seeking Alpha)
Related TWX
The Market In 5 Minutes: AT&T-Time Warner Appeal, Johnson & Johnson Lawsuit, Theresa May And More
Survey: More Than One-Third Of Millennials Prefer To Watch Netflix On TV Over Cable

The Department of Justice cited antitrust concerns in its Monday lawsuit to block AT&T Inc. (NYSE: T)’s Time Warner Inc (NYSE: TWX) acquisition.

But some on the Street consider the claims groundless and the regulatory hurdle surmountable.

The Rating

Rosenblatt Securities analyst Alan Gould maintains a Buy rating on Time Warner with a $103 price target.

The Thesis

Gould said he sees two possible outcomes from the impending legal battle, each of which would result in higher Time Warner valuation. (See Gould's track record here.) 

In the first, AT&T defends its case and buys Time Warner at its $103 offer price.

“While we are not lawyers or antitrust experts, we believe it will be a challenge for the DOJ to prove these [antitrust] claims, and the burden of proof is on the government,” Gould said in a Tuesday note.

In his estimation, a few factors lie in AT&T’s favor: HBO’s status as a standalone service; the Turner networks’ availability on AT&T, DIRECTV, DIRECTV Now, Sling, Sony Corp (ADR) (NYSE: SNE)’s PlayStation Vue and Hulu; and the combined entity’s small market cap relative to Facebook Inc (NASDAQ: FB), Apple Inc. (NASDAQ: AAPL) and Alphabet Inc (NASDAQ: GOOGL) (NASDAQ: GOOG).

“Even though the DOJ says it prefers structural remedies, the court could say behavioral remedies are an adequate remedy to ensure competition,” Gould wrote.

In the event that AT&T doesn’t satisfy regulatory concerns before the deal’s April 22 termination date, Gould said he expects Time Warner to pursue a $7 billion share buyback and see its stock organically rise to the mid-$90s.

Price Action

At the time of publication, Time Warner was trading up $1.32 at $88.82.

Related Links:
AT&T Resists DOJ Order To Divest Time Warner's CNN For Merger Approval
What To Do With Sprint, T-Mobile Now That A Merger's Off The Table

Photo courtesy of Time Warner. 

Latest Ratings for T

Dec 2018CitigroupUpgradesNeutralBuy
Dec 2018Cowen & Co.UpgradesMarket PerformOutperform
Dec 2018JP MorganUpgradesNeutralOverweight

View More Analyst Ratings for T
View the Latest Analyst Ratings

Posted-In: Alan Gould Antitrust Department of Justice Rosenblatt SecuritiesAnalyst Color Price Target Reiteration Analyst Ratings Best of Benzinga


Related Articles (AAPL + FB)

View Comments and Join the Discussion!

Latest Ratings

CNPRBC CapitalUpgrades34.0
View the Latest Analytics Ratings
Don't Miss Out!
Join Our Newsletter
Subscribe to:
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
Your weekly roundup of hot topics in the exciting world of fintech.
Thank You
for registering for Benzinga’s newsletters and alerts.
• The Daily Analysts Ratings email will be received daily between 7am and 10am.
• The Market in 5 Minutes email will be received daily between 7am and 8am.
• The Fintech Focus email will be received every Friday between 2pm and 5pm.

Dollar Index - Pattern Is Increasingly Looking Like A Bottom

USD/JPY Forecast: 111.74 or 113.20?