Barclays says Warner Bros. upside depends on recapitalization
Barclays analyst Kannan Venkateshwar says Warner Bros. Discovery (WBD) formally announced a split of the company into two, which has been expected by investors since it announced a restructuring of the company into two divisions last year. The company has $37B of gross debt and another $5B of off balance sheet debt and neither standalone entity will have enough EBITDA to absorb this on a standalone basis without a significant increase in leverage, the analyst tells investors in a research note. Barclays believes realizing valuation upside will depend more on a future recapitalization path rather than the announcement this morning. It keeps an Equal Weight rating on Warner Bros. Discovery with a $9 price target
Easily unpack a company's performance with TipRanks' new KPI Data for smart investment decisions
Receive undervalued, market resilient stocks right to your inbox with TipRanks' Smart Value Newsletter
Published first on TheFly – the ultimate source for real-time, market-moving breaking financial news. Try Now>>
See today's best-performing stocks on TipRanks >>
Read More on WBD:
Disclaimer & DisclosureReport an Issue
Morning Movers: Warner Bros. Discovery climbs after plans to separate
Warner Bros Stock (WBD) Surges on Streaming Split Plan
Warner Bros. Discovery to separate into two publicly traded companies
Warner Bros. Discovery to separate into two media companies
Now Streaming: UBS raises price target on Netflix amid 'solid' viewership
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Yahoo
24 minutes ago
- Yahoo
Why Qualcomm's (QCOM) Long-Term Prospects Shine, Even if the Stock Doesn't
Qualcomm (QCOM) has underperformed over the past year, declining 26%, primarily due to macroeconomic factors rather than internal company mechanics. Although the company's fundamentals remain very solid, it has faced some headwinds, such as concerns that its business is too concentrated on Apple (AAPL) for modem revenue, despite its broader operations still being more rooted in the Android ecosystem. Easily unpack a company's performance with TipRanks' new KPI Data for smart investment decisions Receive undervalued, market resilient stocks right to your inbox with TipRanks' Smart Value Newsletter Still, that doesn't stop me from seeing the stock as a long-term Buy—especially since my bullishness comes from Qualcomm's key competitive advantage: its ability to build the Snapdragon platform, which integrates a modem, CPU, and even a GPU chip—something no other competitor can currently match. This positions the company to tap into new business opportunities that could help offset its current customer concentration. Beyond that, Qualcomm's asset-light model allows it to generate very high returns on its investments, highlighting its operational efficiency, strong financial health, and consistent value creation for shareholders. This helps justify the company trading at a slightly stretched valuation when considering its operational profits relative to enterprise value. When looking for value stocks, one of the most important factors—if not the most important—is a company's ability to generate consistent earnings. Examining QCOM's balance sheet reveals a capital-light, high-margin model driven by intellectual property (IP) and characterized by heavy investment in research and development (R&D). As a fabless semiconductor company, Qualcomm relies on external manufacturing partners such as TSMC (TSM) and Samsung (SSNLF) for chip production. Notably, only approximately 7% of its $55.3 billion in total assets is allocated to property, plant, and equipment (PP&E), which is relatively low compared to the industry average. This underscores the efficiency of its asset-light business model and the minimal physical infrastructure required to support its operations. Roughly 18% of its assets are classified as goodwill, indicating a strong track record of acquisitions, which is clearly part of its strategy to acquire intellectual property (IP) or talent rather than build everything in-house. One recent example is the $2.4 billion acquisition of the UK-based semiconductor firm Alphawave. Additionally, approximately 12% of Qualcomm's total assets are tied to IP licensing and chip design. That makes sense, given its dominant position in the Android smartphone chip market, especially in the high-end segment with its Snapdragon lineup. Given that around 37% of Qualcomm's total assets are intangible, it's worth considering the company's actual operational efficiency once these intangibles are excluded. To gain a clearer picture, it is sensible to examine how Qualcomm allocates its limited tangible capital to generate profits. Over the past twelve months, Qualcomm produced an operating profit of $12.3 billion. During the same period, its net working capital was approximately $2.7 billion, and its invested capital—mainly property, plant, and equipment, and other intangibles—totaled roughly $8.28 billion. Dividing the operating profit by this invested capital plus working capital yields an eye-catching ~112% return on capital (ROC). That kind of number highlights Qualcomm's exceptional operational efficiency, something typically only seen in asset-light, IP-driven tech or software companies. For context, most of these firms operate with a return on capital (ROC) well below 50%. In short, despite a balance sheet loaded with intangibles, Qualcomm proves that it's highly efficient with the real capital it uses. And that translates into three key advantages: sustainable value creation, a durable competitive moat, and stronger financial flexibility. Even a company with a high return on capital isn't necessarily a buy—not if you're overpaying for it. That's why it's vital to assess operating profitability in relation to the company's total valuation, not just traditional P/E or P/B metrics. One way to do this is by comparing operating profit to enterprise value (EV), which reflects what the market is actually paying for the entire business. In Qualcomm's case, we can measure this by dividing its operating profit by its enterprise value (EV). Over the last twelve months, Qualcomm generated $12.3 billion in operating profit, while its current enterprise value stands at $164.6 billion. That results in an earnings yield of 7.5%. To interpret that number correctly, it should be compared to Qualcomm's cost of capital. Using a 10-year treasury yield of 4.5%, a beta of 1.2, and an equity risk premium of 4–5%, the estimated cost of equity falls between 9% and 10%. Since the earnings yield of 7.5% is below this range, Qualcomm doesn't appear particularly cheap at the moment. However, judged against historic performance against the S&P 500 (SPX), QCOM stock has underperformed. That said, this isn't necessarily a red flag. Even if the stock looks a bit expensive on this metric, Qualcomm continues to create value through its exceptional return on capital and strong cash generation. This is reflected in its sustainable 2.28% dividend yield and $16.5 billion in share buybacks over the past four years. Given Qualcomm's maturity, profitability, and operational efficiency, a lower earnings yield may be viewed as acceptable, reflecting a premium for quality and stability. Analyst sentiment on Qualcomm stock is somewhat mixed. Out of 17 experts who've issued ratings in the past three months, eight are bullish, eight are neutral, and just one is bearish. Still, there's little hesitation when it comes to upside expectations. Qualcomm's average stock price target is at $177.75, suggesting ~14% in potential upside over the next twelve months. While traditional valuation metrics may indicate that Qualcomm is undervalued, I believe that perspective overlooks the company's strong operational efficiency. Qualcomm doesn't need to appear 'cheap' to represent a compelling investment opportunity. Its robust, above-average returns on capital, driven by an asset-light business model, demonstrate its ability to create substantial shareholder value and may, in fact, justify a valuation premium. Viewed through this fundamental lens, and given Qualcomm's consistent track record of long-term value creation, I consider it a solid long-term investment, even at its current, relatively full valuation. Disclaimer & DisclosureReport an Issue Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
5 hours ago
- Yahoo
Barclays Rises 32.3% YTD: Is it the Right Time to Buy the Stock?
Year to date, shares of Barclays PLC BCS have risen 32.3%. The stock has outperformed the S&P 500 index, the Zacks Finance sector, and the industry. Meanwhile, it has underperformed its close peer, Deutsche Bank DB, while outperforming HSBC Holdings PLC HSBC. Year-to-Date Price Performance Image Source: Zacks Investment Research However, lingering uncertainty around tariff policies continues to pose risks. Given this backdrop, let's assess whether Barclays stock is a lucrative bet or not. Restructuring Efforts to Boost Profitability: Barclays has been taking steps to divest unprofitable/less profitable operations and save expenses through business streamlining, while deploying capital into higher revenue-generating February 2025, Barclays sold its consumer finance business in Germany. Last year, the company transformed its operating divisions and divested its Italian mortgage portfolio and $1.1 billion in credit card these efforts, Barclays recorded gross savings of £1 billion in 2024 and £150 million in the first quarter of 2025. The company aims to achieve gross efficiency savings of £0.5 billion this year. By 2026, management expects total gross efficiency savings to be £2 billion and the cost-to-income ratio to be in the high 50s. Its first-quarter 2025 cost-to-income ratio was 57%.The company is investing these savings in high-growth businesses and markets. This April, Barclays entered into a collaboration with Brookfield Asset Management Ltd. to reshape its payment acceptance business with plans to inject roughly £400 million. In March, the bank had announced a capital injection of more than INR2,300 crore (£210 million) into its India operations, following an injection of almost INR3,000 crore (£300 million) in 2021. Last year, the company acquired Tesco's retail banking business, which complements its existing business. In 2023, Barclays acquired Kensington Mortgage, which bolstered its mortgage redeployment of capital into higher-growth businesses and markets through improving efficiency is a multifaceted approach to boosting profitability. Barclays remains committed to this approach, which is likely to help improve profitability over Capital Distributions: As of March 31, 2025, Barclays' liquidity coverage ratio and net stable funding ratio were 175.3% and 136.2%, respectively, well above the regulatory requirements. This indicates a solid liquidity and funding profile. Thus, a solid balance sheet position supports its enhanced capital company has been paying dividends regularly and plans to keep the total dividend payout stable at the 2023 level, with progressive dividend plans to return at least £10 billion of capital to shareholders between 2024 and 2026 through dividends and share buybacks, with a continued preference for bank has increased dividends six times in the past five years with an annualized growth rate of 45.04%. It has a dividend payout ratio of 28%. Barclays Dividend Yield Image Source: Zacks Investment Research Over the past two months, the Zacks Consensus Estimate for 2025 earnings per share has been revised 6.2% and 3% upward to $2.23 and $2.73, respectively. Estimate Revision Trend Image Source: Zacks Investment Research The Zacks Consensus Estimate for Barclays' 2025 and 2026 earnings implies year-over-year growth of 21.2% and 22.6%, respectively. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.) BCS stock is currently trading at a forward 12-month price/earnings (P/E) of 7.17X. This is below the industry's 9.4X, reflecting an attractive valuation. Price-to-Earnings F12M Image Source: Zacks Investment Research On the other hand, Deutsche Bank and HSBC have a forward P/E of 8.31X and 8.64X, respectively. This reflects that Barclays is trading at a discount compared to its peers. Entering 2025, a major rebound in mergers and acquisitions (M&As) was expected, with deal-making activities likely to grow in the mid-20s. This optimism stemmed from pent-up demand, stabilizing or declining interest rates, tightening credit spreads, and strong public market valuations. Also, the Trump administration was perceived as business-friendly, with an expected removal of stringent oversight that could mark the end of the prolonged regulatory of these has transpired till now. Deal-making activities have been muted as ambiguity over the tariff and ensuing trade war has resulted in extreme market volatility. These developments have led to economic uncertainty. Against such a backdrop, companies are rethinking their M&A plans despite stabilizing rates and having significant investible management expects investment banking risk-weighted assets (RWAs) to be 50% of the Group RWAs in 2026. Further, the delay in the M&A rebound will impact the IB business of other global banks, including HSBC and Deutsche Bank, impacting revenue growth to some extent. Barclays' restructuring efforts to boost efficiency and redeployment of capital to higher revenue-generating businesses are likely to help the company's financials. Further, a solid liquidity profile enables sustainable capital distributions. Bullish analyst sentiments and attractive valuations are other the bank's core operating performance remains a concern. Net interest income (NII) and net fee, commission, and other income have been witnessing a volatile trend over the last several quarters owing to a tough operating backdrop. Though NII and net fee, commission, and other income rose in 2024 and in the first quarter of 2025, in light of structural hedges and Tesco bank buyout, the uncertainty about the performance of the capital markets might weigh on the company's top line, which makes us apprehensive about its growth prospects. Further, the likelihood of a significant IB rebound this year remains low amid concerns regarding tariff policies, making BCS stock a cautious shareholders may benefit from holding for strong long-term returns, while potential investors should wait for greater macroeconomic clarity before taking a currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Barclays PLC (BCS) : Free Stock Analysis Report Deutsche Bank Aktiengesellschaft (DB) : Free Stock Analysis Report HSBC Holdings plc (HSBC) : Free Stock Analysis Report This article originally published on Zacks Investment Research ( Zacks Investment Research Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
6 hours ago
- Yahoo
Warner Bros. Discovery Split: What Will Happen to the Movie Studios, HBO Max, Cable Networks and Other Businesses?
Warner Bros. Discovery, as it telegraphed six months ago, is breaking itself into two chunks. One company will be 'WBD Streaming & Studios,' encompassing Warner Bros. Pictures, HBO, Max/HBO Max and more. The other will be 'WBD Global Networks,' home to CNN, TNT, TBS and more, largely comprising linear TV businesses that have suffered declines in revenue and profitability. The split, according to WBD chief David Zaslav, will give each company 'sharper focus and strategic flexibility they need to compete most effectively in today's evolving media landscape' — including potential M&A options. More from Variety 'Harry Potter' HBO Series Casts Bel Powley, Daniel Rigby as Petunia and Vernon Dursley (EXCLUSIVE) Warner Bros. Discovery to Split Into Two Companies Warner Bros. Discovery Lost $11.5 Billion in 2024. So How Did CEO David Zaslav Exceed His Bonus Targets? The separation is expected to be completed by mid-2026. Zaslav will head the streaming and studios company, with the yet-to-be-named TV company led by Gunnar Wiedenfels, currently CFO of Warner Bros. Discovery. The majority of WBD's debt, which stood at about $34 billion of net debt at the end of the first quarter of 2025, will be assigned to the TV networks spin-off, execs said. Here's a breakdown of what each entity would look like following the split. WBD Streaming & Studios Max global streaming service, available in 77 markets (soon to be rebranded back to HBO Max worldwide) HBO linear channels TNT Sports International (U.K. and Ireland) Warner Bros. Motion Picture Group (WBMPG), comprising Warner Bros. Pictures, New Line Cinema, and Warner Bros. Pictures Animation DC Studios and DC Comics Publishing Warner Bros. Television Group (WBTVG), comprising Warner Bros. Television (live-action scripted programming), Warner Bros. Unscripted Television (Warner Horizon Unscripted Television, Telepictures, Warner Bros. International Television Production, and Shed Media), Warner Bros. Animation, Cartoon Network Studios, and Hanna-Barbera Studios Europe Warner Bros. Games Tours, retail and experiences including consumer products and brand licensing Studio production facilities in Burbank and Warner Bros. Studios Leavesden in England WBD Global Networks U.S. general and lifestyle entertainment networks including TNT, TBS, Turner Classic Movies, OWN, HGTV, Food Network, TLC, Discovery Channel, Animal Planet, Cartoon Network and Adult Swim CNN, including CNN International and CNN's forthcoming subscription streaming service Discovery+ streaming service TNT Sports U.S. including rights with MLB, NCAA Division I Men's Basketball Championship, NHL, United States Soccer Federation, Unrivaled, Nascar, Roland-Garros, NCAA Big 12 Football and Men's Basketball, and NCAA Big East Men's and Women's Basketball Bleacher Report (B/R) and House of Highlights (under TNT Sports) Golf Digest (under TNT Sports) Here's a slide WBD presented to investors about what the new companies will look like post-split: Pictured above: David Corenswet in James Gunn's 'Superman,' set to hit theaters July 11, 2025 Best of Variety 25 Hollywood Legends Who Deserve an Honorary Oscar New Movies Out Now in Theaters: What to See This Week Emmy Predictions: Animated Program — Can Netflix Score Big With 'Arcane,' 'Devil May Cry' and the Final Season of 'Big Mouth?' Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
