Warner Bros. Discovery (NASDAQ:WBD) was cut to sector weight from overweight at KeyBanc as the share price may have gotten ahead of itself on speculation of a potential deal with Paramount Skydance (NASDAQ:PSKY).
“We continue to like the fundamental improvement story, thoughthere is likely downside from here if a deal fails to materialize, as the probability-adjusted return from various scenarios seems low.” KeyBanc analyst Brandon Nispel wrote in a note on Thursday. “With WBD trading at ~8.3x our 2026 adj. EBITDA, we think the risk/reward is now neutral.”
Reports suggesting Paramount Skydance (NASDAQ:PSKY) could bid $22 to $24 a share for WBD seem to be the most likely scenario.
“The potential for a bidding war to drive the stock materially higher, potentially in the mid-$30s to low- $40s, is likely a much lower-probability scenario, in our view,” Nispel added. “From our perspective, reports that Zaslav wants a bidding war, believes the stock is worth $40, and scoffs at leaked reports of PSKY’s potential $22-$24 offer make us nervous.”
Shares of Warner Bros. Discovery fell 1.4% in premarket trading on Friday. The stock has jumped 58% since the WSJ first reported about a potential Paramount Skydance bid earlier this month.