Warner Bros' Debt Downgrade Is An 'Ironically Positive' Event: Analyst

Core Viewpoint - Bank of America Securities analyst Jessica Reif Ehrlich maintains a Buy rating on Warner Bros. Discovery (WBD) with a price forecast of $14, citing increased strategic flexibility due to recent internal reorganization and an S&P debt downgrade, which is viewed as an "ironically positive" event [1][4]. Group 1: Strategic Developments - Recent developments, including an internal reorganization and S&P's downgrade of WBD's debt to BB+, have enhanced the company's strategic flexibility [1][4]. - The downgrade is seen as beneficial for WBD's equity, especially in light of the company's significant debt load [4][6]. - The new corporate structure divides WBD into two divisions: Global Linear Networks and Streaming & Studios, aimed at maximizing profitability and driving growth respectively [6][7]. Group 2: Financial Performance and Projections - Despite challenges, the analyst believes in WBD's valuable assets and upcoming catalysts, including easing studio comparisons and potential recovery in advertising [2][3]. - For 2025, projected revenues for WBD are $38.2 billion with earnings per share of $1.63 [7]. Group 3: Strategic Alternatives - The analyst suggests exploring strategic alternatives, such as a potential spin-off of the Studios and Streaming businesses, to unlock unrecognized value [3][6]. - The removal of the "double-trigger" change of control covenant allows for more strategic actions to be pursued without the previous risks [5][6].