Many broadcast media veterans may remember her as Jessica Reif Cohen. Today, she’s Jessica Reif Ehrlich, and still an influential Wall Street media industry analyst who ceremonially asks the first question on iHeartMedia earnings calls.
Now, in her role as a Bank of America Securities analyst and Managing Director, she’s giving a lot of love to Discovery Communications. Investors reacted, with the company’s shares soaring by more than 17% on Friday.
In Ehrlich’s view, the merger of Discovery with WarnerMedia, following its spinoff from AT&T, will create “a global media powerhouse” that could rival Netflix and Disney+.
In fact, she’s so bullish on Discovery that she upgraded DISCA to “Buy,” from “Neutral,” and put a $45 price target on the shares, raising it from $34.
Investors immediately put in their “Buy” orders, pushing DISCA over the $30 mark as shares were up 17.5% as of 2:35pm Eastern.
For Discovery, avoiding another bull-to-bear scenario, as seen in March 2021, is key. Then, analysts gushed over Discovery +, until other Wall Street observers warned that such fervor was premature. DISCA started 2021 at $34.63, surged to $77.27 on March 15, and tumbled to $31.47 by May 17. The remainder of 2021 saw Discovery shares staying in the $25-$29 range.
But, on December 1, a $22.26 closing price suggested Discovery’s post-merger concerns were of concern. Not so, it appears, with strong, steady growth seen since Monday.
The $45 price target is an aggressive one from Ehrlich, with a composite price target of $37.95 in place for DISCA.
Her upgrade comes after Wells Fargo Securities shifted “DISCA” to how it defines a Hold rating, from Sell.
“It remains to be seen how many services consumers will ultimately subscribe to and how subscale providers will compete against behemots … that are all accelerating content spending,” Ehrlich said. “Ultimately, the magnitude of success will be predicated on the success of the combined entity’s global direct-to-consumer, or DTC, strategy. It is our view WBD will eventually combine to one service (vs. bundle) which enhances the depth and breadth of content offerings, reduces churn, increases [lifetime value,] and improves [go-to-market] efficiencies.”
Ehrlich anticipates a total of 148 million streaming subscribers at the combined WarnerMedia-Discovery by the end of 2024. This compares to 97 million as of today.
