Will Warner Bros. Discovery's Split Produce Double the Upside?

Core Viewpoint - Warner Bros. Discovery is undergoing a strategic separation into two independent companies to unlock shareholder value and simplify its complex structure, which has historically led to a conglomerate discount in its stock valuation [1][3][11]. Group 1: Company Structure and Strategy - The company plans to separate into two entities by mid-2026: "Streaming & Studios" and "Global Networks" [3]. - "Streaming & Studios" will focus on content creation and digital growth, housing valuable assets like HBO and DC Studios [4][6]. - "Global Networks" will manage legacy cable networks and absorb the majority of the company's $38 billion debt, allowing for a more efficient cash flow operation [8][10]. Group 2: Financial Performance and Metrics - In Q1 2025, the direct-to-consumer segment added 5.3 million subscribers, reaching a total of 122.3 million [5]. - Advertising revenue in the streaming segment increased by 35%, indicating strong performance in ad-supported tiers [7]. - The company has successfully repaid $2.2 billion of its debt in Q1 2025, showcasing financial discipline [10]. Group 3: Market Outlook and Analyst Sentiment - The consensus 12-month price target for Warner Bros. Discovery is $12.17, reflecting a potential upside of 21.59% from the current price of $10.01 [12][14]. - Analysts have expressed positive sentiment regarding the separation strategy, with several maintaining or upgrading their ratings post-announcement [13][14]. - The split is expected to create two distinct investment opportunities, appealing to different investor profiles [12][15].