Wells Fargo Raises WBD Price Target and Highlights M&A Potential: Strategic Transformation and Undervaluation in the Streaming Sector

According to a report by Wells Fargo, Warner Bros. Discovery (WBD) has seen its price target raised to $14 from $13, with the firm maintaining an Equal Weight ratingWells Fargo Raises Warner Bros. Discovery (WBD) Price Target, …^[1]. The analysis underscores WBD's Studios and Streaming & Studios (S&S) unit as a potential M&A target, citing a 30% probability of the segment being sold at a valuation exceeding $21 per share in a bullish scenarioWells Fargo sees Warner Bros Discovery S&S as potential Netflix ...^[2]. This assessment is driven by the unit's $12 billion annual content spend, a $6.5 billion library, and a 100-acre studio lot—assets that could attract buyers like Netflix, Amazon, or AppleWarner Bros. Discovery could see a surprising buyer: Wells Fargo^[3].

Warner Bros. Discovery's strategic transformation is central to this narrative. The company is actively decoupling its legacy linear networks (CNN, TNT, TBS) from its high-growth streaming and studio operations, with a planned separation by mid-2025Warner Bros. Discovery's Strategic Split: Decoupling Linear Legacy from Streaming Futures^[4]. This move aims to unlock value by isolating the debt-laden traditional media business for potential divestiture while allowing the streaming segment—comprising Max and Warner Bros. Pictures—to focus on content-driven expansion. In Q1 2025, the streaming unit added 5.3 million subscribers, driven by hits like The White Lotus and the Minecraft Movie, while content amortization costs per subscriber dropped by 18% to $9.25Streaming Transformation: Warner Bros Discovery’s Bold Digital …^[5].

Despite these strides, WBD faces significant challenges. The company's debt load remains at $34.6 billion, with a net leverage ratio near 93% of equityDisney Stock (NYSE:DIS) vs Warner Bros Stock (NASDAQ:WBD): Two Diverging Entertainment Giants^[6]. Cost-cutting measures, including a hiring freeze, the cancellation of a Wonder Woman game, and a $9 billion asset write-down for its linear networks, have been implemented to address financial pressuresDebt, layoffs and spinoffs: Warner Bros. Discovery's turbulent path ...^[7]. Meanwhile, leadership changes are underway: David Zaslav will lead the new Warner Bros. entity, while CFO Gunnar Wiedenfels will oversee Discovery GlobalWarner Bros. Discovery Announces Post-Separation Company Names and Leadership Appointments^[8].

Valuation metrics further highlight WBD's undervaluation. The stock trades at 7.3x EV/EBITDA, significantly lower than Disney's 13.6x and Netflix's 36x forward P/E ratioNFLX, DIS, or WBD: Which Streaming Giant Is the Best Investment?^[9]. While Disney's streaming segment reported $346 million in operating income for Q3 2025 and benefits from a diversified ecosystem (including Parks and Experiences), WBD's streaming unit posted $293 million in EBITDA for Q2 2025, with 125.7 million subscribersWarner Bros. Discovery Stock To $30?^[10]. However, WBD's average revenue per user (ARPU) has declined by 10.7% year-over-year to $7.14, underscoring the need for pricing power and advertising innovationDisney Stock (NYSE:DIS) vs Warner Bros Stock (NASDAQ:WBD): Two Diverging Entertainment Giants^[11].

The M&A potential for WBD's S&S unit remains compelling. A Netflix acquisition, for instance, could deliver 18% earnings accretion by 2030 and propel the streaming giant toward a $1 trillion market capWells Fargo sees Warner Bros Discovery S&S as potential Netflix ...^[12]. Other bidders, including Amazon and Paramount Skydance, face regulatory and financial hurdles, but the possibility of a $22–$24 per share bid from Skydance suggests a floor for WBD's valuationWarner Bros Discovery vs Netflix, Walt Disney^[13].

In conclusion, Wells Fargo's upgraded price target reflects a strategic inflection point for WBD. While the company's debt and competitive pressures persist, its transformation into a leaner, content-focused entity—coupled with undervaluation relative to peers—creates a compelling case for both operational turnaround and M&A-driven value creation. Investors should monitor the separation timeline, subscriber growth, and potential bids from industry leaders as key catalysts.