Warner Bros. Discovery, Inc. (WBD): what the price requires

The current priced-in claim for Warner Bros. Discovery, Inc. (WBD) is temporarily suppressed because the live engine record is unavailable. The dated report remains a snapshot, not a current market read.

Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/WBD

Headline

FieldValue
TickerWBD
CompanyWarner Bros. Discovery, Inc.
Current price$27.08/sh
CompositionDistribution 52% / Advertising 20% / Content 26% / Other 3%

What The Price Requires (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

FieldValue
Inversion basiswhole-company
Operating margin needed5.3%
Operating margin (mid-cycle)35.7%
Margin compression implied-30.4pp
Trailing margin (depressed year)-5.7%
Multiple paid8x mid-cycle operating income

The operating-margin requirement is derived from the framework's value band at year 11, a separately labeled basis from the headline growth/duration solve.

The price sits below what even a 5%/yr operating-profit decline would warrant; the inversion reports a bound, not a solved growth path.

Solve inputs: computed at a 10% cost of capital with 4% terminal growth over a 5-year stage.

How unusual the bet is: within-range (limited comparison data)

ReferenceValue
vs own history-0.24σ
implied end-window share0%

Valuation X-Ray

Every valuation family lands below the price. The price therefore requires assumptions beyond what those standard frames encode.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

FamilyMedian price/FVModelsReads
Asset2.19x2expensive
Earnings—0—
Relative1.51x1expensive
Growth—0—

Families that call it expensive: Asset, Relative

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 6.6%); the inversion above states its own rate.

Per-Model Detail (n=3)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth$1.2421.83xnoFCF base $2.3B, growth -3% (input: historical growth), terminal g 0.5%, WACC 6.6%, 5yr projection
DCF Exit MultipleGrowth$22.471.20xnoExit EV/EBITDA: 24.8x / 26.8x / 28.8x (bear / base = today's held flat / bull), 5yr
Relative ValuationRelative$17.921.51xyesP/S fallback (negative EPS): Sector P/S 1.2x × TTM revenue — excluded from consensus
Simple DDMGrowth——no—
Two-Stage DDMGrowth——no—
Simple Excess ReturnAsset$13.072.07xyesReference only (book value floor): BV/sh $13.07, ROE negative
Two-Stage Excess ReturnAsset$11.772.30xyesReference only (book value with convergence): BV/sh $13.07, ROE converges to ke
Discounted Future Market CapGrowth$15.651.73xnoRev $37.2B, growth -3% (input: historical growth; tapered), Terminal P/S: 1.5x / 1.8x / 2.1x (bear / base = today's held flat / bull, cap 8x)
Peter Lynch Fair ValueRelative$0.00—noNegative/zero EPS — earnings-based value floored at $0
Margin TrajectoryGrowth——no—
Earnings Power ValueEarnings——no—
Residual IncomeAsset——no—
Graham NumberAsset——no—
EV/EBITDA RelativeRelative$0.012707.50xyesEBITDA $3.67B × sector EV/EBITDA 7.0x (excluded from median)
FCF YieldEarnings$0.012707.50xyesFCF $2310.0M / Kₑ 9.3% — zero-growth perpetuity (excluded from median)
SBC-Adj FCF YieldEarnings$0.012707.50xyesSBC-adj FCF $1.51B (FCF $2.31B − SBC $0.80B) capitalized at Kₑ (excluded from median)
Ben Graham FormulaEarnings——no—
ROIC-Justified P/BAsset——no—
P/Sales SectorRelative$17.921.51xnoRevenue $37.21B × sector P/S 1.2x
PEG Fair ValueRelative——no—
Earnings YieldEarnings——no—
Funds From Operations MultipleRelative——no—
Clinical Phase NPVGrowth——no—
MertonAsset——no—
V5 Mechanical———no—

Solvency

FieldValue
Net debt$29.9b
Net debt / NOPAT (after-tax)2.89x
Net debt / operating income (pre-tax)2.28x
Interest coverage6.3x
Share count CAGR (dilution)39.1%
Burning cashno

Leverage and coverage are computed on normalized mid-cycle operating income (mid-cycle margin 35.7%); the trailing year was depressed.

Bullet Takeaways

Bull Case

Start with the biggest fear, then check it, because the bear's case here is really just deal risk. The headline worry is that Warner Bros. Discovery is a melting linear-TV business drowning in debt. But that frame is now overtaken by events: the company has agreed to be acquired by Paramount Skydance for $31 per share, shareholders have approved, and the transaction is awaiting regulatory clearance. At about $26 (as of June 27, 2026) the stock trades below the deal price, so the immediate question is not what the business is worth standalone but whether the deal closes, and the gap is the market's estimate of that risk. If it closes, holders are paid well above where the standalone fundamentals would put the stock.

The asset that drew the bid is genuinely valuable, and it is worth understanding why. Warner Bros. Discovery owns one of the deepest content libraries in entertainment, the Warner Bros. studio, HBO, and the Max streaming platform, and the streaming business is the bright spot: the company surpassed 140 million global streaming subscribers and is targeting more than 150 million by year-end, driven by HBO Max launches in new European markets. Streaming and studios EBITDA is rising even as linear declines. The 10-K describes a distribution business whose largest component is "linear distribution rights to our networks from cable, DTH satellite, and telecommunication service providers," but the value the acquirer is paying for is the library and the streaming franchise, not the shrinking linear bundle.

The standalone plan, now likely superseded by the deal, was itself a value-unlock: WBD had been preparing to separate into a Streaming and Studios company and a Global Linear Networks company, the 10-K confirming the classification of operations to support that "previously proposed Separation Transaction." Splitting the growing streaming asset from the declining networks would let the market value each on its own merits rather than blending them into one depressed multiple. Whether through the Paramount Skydance acquisition or the separation, the bull case is the same: the parts are worth more than the conglomerate, and a buyer has now agreed.

Bear Case

The structural fragility a holder faces is concentrated in two places: the debt and the deal. Take the deal first, because it now dominates. The stock trades below the $31 acquisition price for a reason, the market is discounting the chance that regulatory clearance fails or the terms change. A media merger of this scale draws antitrust scrutiny, and if it breaks, the stock does not stay near $26; it falls back toward what the standalone business is worth, which is a heavily indebted media company in secular decline on the linear side. The merger-arbitrage gap is the bear case priced into the spread.

The balance sheet is why a broken deal would hurt. Warner Bros. Discovery carries net debt around $30 billion, and while that is a serviceable 2.25 times normalized operating income, the absolute load is enormous and was assembled to fund the 2022 merger that created the company. The standalone business has been generating inconsistent free cash flow, with the most recent quarter showing negative free cash flow weighed down by a $2.8 billion Netflix termination fee and separation costs, and a $2.9 billion net loss. Net leverage sat around 3.4 times. A linear-networks business in decline servicing $30 billion of debt is exactly the profile that makes a standalone WBD a difficult equity, which is part of why the company sought a transaction in the first place.

The operating decline underneath is real regardless of the deal. The linear networks that still generate much of the cash flow are shrinking as cord-cutting continues, and the 10-K acknowledges the industry's "content consumption patterns" keep evolving against the traditional bundle, with "increased competition from new entrants and emerging technologies." Streaming is growing but still a smaller profit contributor than the networks it is meant to replace, and the transition has been costly. The price implies the market is paying about seven times normalized operating income, below what even a modest annual decline would warrant, which tells you the standalone business is priced for shrinkage. The deal is the upside; the broken-deal scenario is a leveraged, declining media conglomerate, and the spread is the market weighing the two.

Valuation

Valuation for Warner Bros. Discovery now runs through the deal, but the standalone read still matters as the floor if it breaks. The Paramount Skydance agreement at $31 per share is the dominant fact: the stock at about $26 trades at a discount to that price, and the spread is the market's pricing of completion risk, not a judgment on intrinsic value. The standalone inversion frames the fundamentals as a bound rather than a point: at about seven times normalized operating income, the price sits below what even a 5%-a-year decline in operating profit would warrant. In plain terms, the standalone business is priced for shrinkage, which is what makes the acquisition premium meaningful.

The methods we use to triangulate are distorted by the depressed trailing results and have to be read on normalized rather than reported earnings. On a GAAP basis the company is loss-making, dragged down by amortization, impairments, and one-time charges like the Netflix termination fee, so the earnings-based methods produce noise. The frames that work are the asset and relative lenses: book value per share is near $13, and the relative-multiple lens on revenue lands near $18, both below the current price, which already reflects the deal premium over standalone value. The cleaner way to see it is that the market priced the standalone business in the high teens and the acquisition lifted it toward the deal price, with the remaining gap to $31 representing close risk. The peer cohort here, large cable and media distributors like Comcast and Charter, carries the same linear-decline and high-leverage profile that pressured WBD's standalone multiple.

Solvency is the swing factor in the broken-deal scenario. Net debt around $30 billion, at about 2.25 times normalized operating income with interest coverage near six times, is serviceable while the business generates cash, but the cash flow has been lumpy and the most recent quarter was negative on free cash flow after the termination fee and separation costs. The downside, if the deal fails, is bounded by the content library and the streaming franchise, both real assets a future buyer or a successful separation would value; the immediate risk is entirely about whether the Paramount Skydance acquisition clears, and the stock will track that probability more than any fundamental metric until it resolves.

Catalysts

The defining catalyst is the pending acquisition. Paramount Skydance has agreed to acquire Warner Bros. Discovery for $31 per share, shareholders have approved the transaction, and it is awaiting regulatory clearance; Paramount Skydance paid the $2.8 billion Netflix termination fee on WBD's behalf under the merger terms, after Netflix had been a competing suitor. Until the deal clears or breaks, the stock will trade on completion probability more than on quarterly results.

The underlying business showed its familiar split in the first quarter of 2026. Total revenue was about $8.9 billion, down roughly 3% excluding currency, and the company reported a net loss of about $2.9 billion, driven largely by the $2.8 billion Netflix termination fee, with earnings per share of about negative $0.05 that still beat expectations. Free cash flow was negative by about $476 million, pressured by the fee and roughly $100 million of separation and transaction items, with net leverage around 3.4 times. The bright spot was streaming, with the company surpassing 140 million global subscribers and targeting more than 150 million by year-end on new HBO Max market launches. The watch items are regulatory approval of the Paramount Skydance deal, the continued streaming subscriber ramp, and the pace of linear-network decline, the last two of which set the floor if the deal does not close.

Peer Cohorts (Per Segment, With Filing Citations)

Streaming (reported)

Studios (reported)

Global Linear Networks (reported)

Methodology Note

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.

Sources

company merger disclosures, 2026 · Q1 2026 earnings release, May 2026

View the full interactive WBD report on boothcheck