Morningstar

Warner Bros. Discovery: Separation Leaves Both Halves Positioned to Succeed and Could Unlock Value

Maintaining fair value estimate on Warner stock.

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Securities in This Article
Warner Bros. Discovery Inc Ordinary Shares - Class A
(WBD)

Key Morningstar Metrics for Warner Bros. Discovery

Warner Stock Update

Warner Bros. Discovery WBD is expected to split into two separate companies by mid-2026. CEO David Zaslav will lead the streaming and studios firm, and CFO Gunnar Wiedenfels will be CEO of Global Networks. Warner also announced a debt tender offer.

Why it matters: Distinct public trading could uncover value among the traditional networks, which will continue to generate cash, and the streaming business, which is poised for growth. The debt tender could improve the firm’s financial position, depending on how bondholders respond.

  • Global Networks will not be positioned to die, in our view, but will still shrink materially. Some attractive assets, such as US sports rights, the CNN and Discovery streaming properties, and digital assets like Bleacher Report, can mitigate the linear television networks’ decline.
  • After years of heavy investment and international expansion, we believe Streaming & Studios has a bright future, with solid television, movie, and video game studios, along with HBO and HBO Max.

The bottom line: We maintain our $20 fair value estimate, based on the cash flow we project these businesses will collectively generate. Our operating outlook has not changed with this announcement. We don’t expect substantial dis-synergies—or better opportunities—upon the split.

  • Sports rights within Global Networks should leave the networks with comparable attractiveness and bargaining power with traditional television distributors. This position contrasts with Comcast’s planned network spinoff, which will not retain significant sports rights.
  • Our no-moat rating is predicated on the shrinking legacy television business, which has historically generated almost all WBD’s profits. As the separation approaches and Warner discloses pro forma financials, we will re-evaluate the new companies individually.

Between the lines: Streaming & Studios would complement the media assets Comcast will retain, as the Peacock streaming service lags behind Max.

Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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