Warner Bros Discovery (NASDAQ:WBD) Surges on Paramount Bid and Separation Plan

NASDAQ:WBD Stock Surges on Paramount Skydance Bid and Separation Outlook

The rally in NASDAQ:WBD has transformed the stock from a deeply discounted media play into one of the hottest trades in entertainment this quarter. Closing at $18.87 on September 12, up 16.7% in a single session and nearly 146% over the past year, Warner Bros. Discovery is now at the center of a tug-of-war between its planned split into two companies and a potential majority-cash takeover offer from Paramount Skydance (NASDAQ:PSKY). The stakes are high, with WBD’s $46.7B market cap, $38.4B in trailing twelve-month revenue, and $34.6B in debt creating both upside catalysts and balance sheet challenges.

Streaming Growth and Direct-to-Consumer Monetization

WBD’s transformation hinges on the streaming and studios business. Direct-to-consumer subscribers rose to 125.7M in Q2 2025, up 2.7% sequentially and 21.6% year-on-year. However, ARPU weakened to $7.14, down 10.7% from last year despite a slight quarterly uptick. The trade-off has been offset by advertising revenues, which reached $282M in Q2, climbing 18.9% sequentially and 17.5% year-over-year.

The result is a streaming and studios unit that delivered adjusted EBITDA of $1.33B in the first half of 2025, up 241% year-on-year, with margins expanding to 13.9%. Overall, consolidated adjusted EBITDA came in at $4.05B in H1, while free cash flow fell 26.4% to $1B, reflecting debt servicing needs. The margin inflection shows WBD’s streaming operation can compete with Netflix (NASDAQ:NFLX) and Disney (NYSE:DIS) if capital constraints don’t choke reinvestment.

Separation Strategy and Valuation Impact

The strategic split—set for mid-2026—would isolate the declining Global Linear Networks from the growth engine in streaming and content production. The linear division posted $9.57B in H1 revenues, down 7.8% year-on-year, with margins shrinking to 34.5%. In contrast, the growth-focused segment is positioned to trade at multiples closer to streaming peers. Netflix trades at forward EV/EBITDA near 38x, Roku (NASDAQ:ROKU) at 32x, while WBD remains stuck around 7.3x, barely above Comcast’s 5.7x.

A separation could justify equity value well into the $20s per share. Current book value per share is $14.56, and adjusted EBITDA annualized from H1 stands at $8.1B. Using a peer group mean multiple closer to 19x, the implied fair value easily crosses $21–$23, aligning with bullish analyst targets.

Debt Burden and Balance Sheet Constraints

Debt remains the Achilles’ heel. Net debt is still $29.75B, down from $45.26B in 2022 but weighing heavily against equity value. Leverage remains elevated at 92.7% debt-to-equity. While operating cash flow reached $5.1B over the trailing twelve months, interest expenses will continue to suppress earnings. EPS sits at $0.31 on a trailing basis, with a lofty P/E of 60.9 suggesting that the equity story is more about rerating and deal-making than near-term profitability.

Paramount Skydance Bid and Market Reaction

The Wall Street Journal’s report that PSKY may table a majority-cash bid sent WBD shares up 29% intraday on September 11, with momentum carrying over into the following session. Paramount stock also rose, though more modestly at 16%. The proposed acquisition would combine two of Hollywood’s “Big Five” studios, uniting Warner Bros. and Paramount Pictures while merging Paramount+ with Max.

Valuation is the sticking point. Analysts argue WBD’s streaming and studios alone could be worth $24 per share post-split, implying any takeover must meet or exceed that number. Paramount, with a market cap of just $20.6B and its own $30B enterprise value, would likely need to assume WBD’s $35B debt load. That pushes the effective EV close to $80B, a stretch even with aggressive synergy assumptions.

Regulatory and Political Headwinds

A merger between WBD and Paramount Skydance would attract scrutiny. Together, they control a significant portion of U.S. linear networks and streaming market share. Both HBO Max and Paramount+ account for about 4% of total TV screen time. Adding IP portfolios like Harry Potter, DC, and Mission: Impossible raises concentration risks.

Complicating matters further is the political backdrop. The Trump administration has strained ties with both companies—Trump has sued Paramount and frequently attacked CNN, owned by WBD. This makes regulatory approval less predictable.

Technical Momentum and Market Sentiment

From a technical standpoint, NASDAQ:WBD has ripped through resistance levels. Shares hit a 52-week high of $19.33, far above the 200-day moving average of $10.63. RSI levels look stretched, reflecting exuberance after a 55% weekly rally. Short interest has dropped 32% year-on-year to 3.8% of float, signaling that bearish bets are being unwound.

Despite volatility, the market is repositioning for higher valuations, betting either on a Paramount buyout or successful separation. Consensus analyst estimates put the average target at $14.90, with a high of $24, suggesting divergence between market euphoria and analyst conservatism.

Insider and Institutional Activity

Institutional investors hold roughly 73% of shares, with insiders owning nearly 6%. Tracking insider transactions via stock profile will be critical as management weighs offers against the separation plan. CEO David Zaslav, who earned $63.5M in 2024 compensation, has already faced shareholder backlash, with over 1B votes opposing his pay plan. Despite that, Zaslav extended his contract through 2030, signaling continuity at the top.

Final Take: Buy, Sell, or Hold NASDAQ:WBD

After restructuring the debt, proving streaming profitability, and with takeover speculation driving momentum, WBD presents asymmetric upside. Valuations remain cheap at 7.3x EV/EBITDA compared to streaming peers, while book value supports the rally. Yet, the debt load and regulatory risk keep the story high-risk, high-reward.

Given the trajectory to $23+ fair value, strong institutional ownership, and the likelihood of either a separation rerating or an opportunistic buyout, NASDAQ:WBD is a Buy at $18.87, but with caution warranted around political risk and stretched technicals.

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