KeyBanc's Brandon Nispel downgraded Warner Bros. Discovery (NASDAQ: WBD) to Sector Weight, arguing that takeover speculation has inflated shares beyond fundamentals.
He sees a 50% chance no deal happens and the stock falls back to $12, a 40% chance of a $25 Paramount Skydance (NASDAQ: PSKY) offer, and only a 10% chance of a bidding war lifting shares to $40—leaving the risk/reward neutral.
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Nispel acknowledged fundamental progress, particularly in the Studios and direct-to-consumer segments. He expects Studios’ EBITDA to exceed the company’s $2.4 billion guidance, driven by strong theatrical performance. He forecasts DTC EBITDA above $1.3 billion this year, with a pathway to more than $2.6 billion and $2 billion, respectively, by 2026.
He added that Network EBITDA risk has eased with NBA rights costs rolling off, offering a profitability tailwind.
Still, with WBD trading around 8.3x KeyBanc’s 2026 adjusted EBITDA estimate versus a three-year average of 6.6x, Nispel sees the shares as fairly valued. His base case assumes a three-year revenue CAGR of 1.6% and adjusted EBITDA CAGR of 2.8%, with margins expanding to 24.4% in 2026.
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KeyBanc set its 12-month fair value at $18, while outlining a $28 bull case and $11 bear case. Nispel concluded that better entry points may emerge on a pullback.
Analysts remain cautious on Warner Bros. Discovery, with Morgan Stanley, Bernstein, and Wells Fargo nudging price targets higher while keeping neutral ratings, TD Cowen downgrading to Hold, and Needham reiterating Hold — signaling limited upside despite modest target increases.
Price Action: At the last check on Friday, WBD shares were trading lower by 0.81% at $19.63.
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