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Warner Bros. Discovery is poised for a pullback as it contends with media industry headwinds, particularly if its proposed merger with Paramount Skydance fails to materialize, according to KeyBanc Capital Markets. The investment firm downgraded Warner Bros. Discovery’s stock rating to sector-weight from overweight. It has no price target on the shares, which have soared 68% in the past month. “The stock’s valuation has gotten ahead of the fundamentals,” KeyBanc analyst Brandon Nispel said Thursday in a note to clients. “We don’t see much risk to expectations, but we also do not believe the fundamental improvement justifies the recent stock price appreciation, where we would potentially look to be more constructive on a pullback.” Earlier this month, CNBC reported Warner Bros. Discovery is likely to field a bid from Paramount Skydance , with an offer expected to land somewhere between $22 and $24 per share. Warner Bros. Discovery shares soared more than 28% to close at $16.15 following the report, the stock’s best day. The company was formed in early 2022 when AT & T spun off WarnerMedia to merge with Discovery, Inc. KeyBanc analysts say Warner Bros. Discovery is unlikely to see additional upside from any potential merger, particularly as the deal is likely to come under intense scrutiny from federal regulators. Little upside left “Considering there are likely to be a fairly high degree of regulatory concerns from this deal as there have been with most Media M & A, we think the spread between the bid and how WBD’s stock will trade will ultimately be wide, which at current levels, suggests there isn’t much left in terms of upside,” Nispel wrote. WBD YTD mountain WBD shares in 2025 Warner Bros. Discovery also faces several other headwinds, including a steep decline in television subscribers and viewership, a massive shift in advertising from broadcast to digital channels and weak macroeconomic activity. To be sure, Warner Bros. Discovery has an opportunity to unlock shareholder value by spinning out Warner Brothers from its Global Networks business, a move announced in June, and the company is on a strong path to continue improving its streaming and studios revenue, the analyst said. KeyBanc’s call matches the majority of analysts’ ratings on Warner Bros. Discovery. Fifteen Wall Street shops have a hold rating on the media company, while 13 analysts recommend it as buy or strong buy, according to LSEG. The consensus price target on the Street is less than $15. Warner Bros. Discovery shares fell nearly 2% in pre-market trading on Friday.
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