On Thursday, Macquarie adjusted its stance on Warner Brothers Discovery (NASDAQ:WBD) shares, downgrading the company from Outperform to Neutral.
This change follows the recent news that Warner Brothers Discovery's TNT network did not secure the renewal of the NBA broadcasting rights. The analyst from Macquarie set a new price target for the company's stock at $9.00, a decrease from the previous target of $13.00.
The loss of NBA rights is seen as a significant setback for Warner Brothers Discovery, particularly for its Max streaming service, which was expected to benefit from the sports content. The analyst expressed concerns that this could accelerate the decline of the company's linear networks as well.
The absence of NBA programming is anticipated to lead to a sharp fall in advertising revenues beginning in the fourth quarter of 2025 and could also diminish the company's leverage in future cable affiliate negotiations.
The analyst highlighted that the Max streaming service's appeal is partly due to its diverse content offerings, which range from Warner Bros. studio productions to HBO, Discovery's lifestyle networks, and sports. Without the NBA, the service's sports content will be notably weakened.
Despite Warner Brothers Discovery's intention to challenge the NBA's decision legally, the analyst remains skeptical about the potential for a favorable outcome. Even if Warner Brothers Discovery were to prevail in court, the costs might be too high to justify the effort.
In conclusion, the analyst's downgraded rating and reduced price target reflect a less optimistic outlook for Warner Brothers Discovery's stock. With the stock price already considered low, the loss of a core content asset like the NBA rights casts doubts on the company's fundamental investment appeal.
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