Buying WBD's stock ahead of a possible Paramount deal? This analyst is cautious.

By Emily Bary

The likelihood of a deal between the two media players seems high, a TD Cowen analyst says - but Warner shares could 'round-trip' if a merger fails to materialize

Warner Bros. Discovery shares have popped in recent days, but a TD Cowen analyst warns they could "round-trip" if a rumored deal with Paramount doesn't get announced.

There's a good chance Warner Bros. Discovery and Paramount Skydance will be able to strike a merger agreement, according to TD Cowen analyst Doug Creutz. But whether you should buy Warner's stock in hopes of that outcome is another story.

Creutz cut his rating on Warner's stock (WBD) to hold from buy late on Monday, citing a big recent rally in the shares on deal speculation. After the Wall Street Journal reported that Paramount (PSKY) was working on a bid, Warner shares soared around 50% over a matter of days to close in on a $20 price.

But while a bid north of $20 is possible, "we don't love the risk-reward here given the potential for WBD shares to quickly round-trip to $11-$12 if the bid doesn't materialize," Creutz wrote.

Warner shares are falling on Tuesday, down 7.4% to a recent $18.02.

Paramount and Warner declined to comment on the deal speculation.

See more: A likely bid by Paramount for Warner Bros. Discovery means the big media roll-up is underway

Creutz's relative caution comes even as he thinks a deal for Warner is fairly likely and that Paramount is the most reasonable suitor.

"We continue to believe the rationale for such a deal would be at least as much political as business-related, and therefore standard analytical frameworks are probably less useful than normal," he wrote. "We do think the probability of a bid happening (given the report) looks reasonably high, that the probability of acceptance would be high in this scenario and that the probability of regulatory approval would also be high; however, there would be a lot of hurdles."

Could there be a bidding war? Creutz has some skepticism that Warner would fetch a bid from a different media company, as "there are a limited number of potential suitors," and there are potential drawbacks to tie-ups with members of that select group.

"We think the regulatory hurdles for Comcast would be much higher than for [Paramount], given [President Donald] Trump's animosity towards most legacy media companies; the capital commitment required for a deal is probably too much for Sony; and we don't expect to see other large tech companies choosing to compete with [Paramount]," which offers more opportunity for synergies, he said.

Creutz titled his note to clients, "The Arbs Can Take It From Here," seemingly in reference to the idea that arbitrage traders can look to profit off merger speculation.

"Sometimes the best move is to admit you don't have a particular edge on a situation and move to the sidelines; that is what we are doing here," he noted.

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-Emily Bary

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09-16-25 1102ET