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Warners Bros. Discovery (WBD) Stock Pops on Goldman Sachs Upgrade

Investor Place · 07/27/2022 17:17

InvestorPlace - Stock Market News, Stock Advice & Trading Tips

The logo of the new Warner Bros Discovery company on smartphone screen.
Source: Jimmy Tudeschi / Shutterstock.com

After a difficult year, Warner Bros. Discovery (NASDAQ:WBD) is finally on a path toward growth. Or at least Goldman Sachs thinks so. Analysts from the investment bank just issued a bullish take on WBD stock, setting a price target of $22 per share.

News of this upgrade caused shares to close up by 5% today. Now, investors are wondering if negative market momentum is finally shifting for the entertainment giant. However, Goldman Sachs also thinks WBD’s gain will mean a loss for Paramount (NYSE:PGRE). It recently issued a bearish take and target reduction on PGRE stock.

Let’s take a look at why Goldman Sachs thinks WBD is headed back to the top.

What’s Going on With WBD Stock?

Many experts have soured on Warner Bros. since it spun off from AT&T (NYSE:T). As of this writing, WBD stock is down more than 30% year-to-date (YTD). Further, the company laid off 30% of its sales force in June. That suggests the company may foresee some leaner times ahead.

The tide may be starting to turn, however. Recently, Neil Macker of Morningstar speculated that WBD stock could hit $40 per share. Although Goldman Sachs isn’t quite as bullish, analyst Brett Feldman is optimistic about its growth prospects.

In a note to investors, Feldman touted the company’s “material scale as a global streamer” that is “fortifying its linear networks business and driving significant cost synergies.” The analyst also believes that its “merger integration risks and cyclical pressures on its linear advertising revenue are more than fully reflected in the stock at current levels.”

Still, Goldman Sachs sees a less-than-bright future ahead for one of one of WBD’s competitors. Feldman issued a “sell” rating for Paramount and a $20 price target.

The Bottom Line

Feldman feels that Paramount will need to scale up its content investments in order to compete with more established competitors like Netflix (NASDAQ:NFLX) and Disney (NYSE:DIS). However, the analyst does see Warner Bros. Discovery as having the potential to keep gaining and secure more market share. At its current low price of around $15, WBD stock is worth watching as investors seek bullish plays on the streaming sector.

On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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