Discovery Will Easily Compete With Netflix And Disney

Summary

  • Discovery is merging with WarnerMedia, combining the worldwide distribution of the former with HBO, CNN, sports rights, and iconic DC brands like Wonder Woman, Batman, and Superman.
  • The new company has worldwide distribution matched only by Netflix, and IP exceeded only by Disney, plus CNN, the NBA, NHL, MLB, March Madness, and the Olympics.
  • Initial content spend target is $20 billion, exceeding Netflix's $17 billion 2021 guidance. The direct to consumer service, combining HBO Max and Discovery+, will be a well funded homerun.
  • Despite the heavy investment in growth initiatives, the company is a cash flow machine, guiding to $3.65 a share for 2023. With a strong growth profile, that's just the beginning.
  • The stock price is down for non-economic, technical reasons: Famously dividend-focused AT&T shareholders will receive 71% of Discovery stock and may sell immediately since Discovery pays no dividend.
TCA Summer Event 2018
Photo by Amanda Edwards/Getty Images Entertainment via Getty Images

As described in the May 17, 2021, merger deck Discovery (DISCK) will acquire Warner Media from AT&T in a deal expected to close mid 2022. AT&T shareholders will receive 71% of DISCK stock, and the new company will be led by Discovery's extremely capable CEO

This article was written by

My handle is the Michigan Value Investor, but everyone calls me MVI. I have a PhD in theoretical physics from UC Berkeley and worked briefly in the field before switching my interests to investing. I worked as an analyst at a billion dollar fund for several years before starting my own very small fund in 2009. During this time I have developed a group of stocks that I understand well, and I have excellent relations with management in many cases. This long standing familiarity with a select group of companies means I have a pool of investable ideas available to me where I don’t have to take time to get up to speed.


I first became interested in investing when I read an article about Warren Buffett, and my investing style reflects his teachings and those of Charlie Munger. Unlike many value investors, I am not impressed with Ben Graham as an investor.

Analyst’s Disclosure:I am/we are long DISCK. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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