As the first week of 2022 winds to a close, Discovery Communications (NASDAQ:DISCA) is off to an excellent start. The media giant has received good news from Wall Street that has sent DISCA stock straight into the green.
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So what do you need to know?
The company is likely best known for the yearly Shark Week event, but it maintains a cumulative subscriber base of roughly 2 billion, making it one of the world’s largest and most important media content providers. As it turns out, the company is eyeing a new deal that may take it to the next level.
What’s Happening with DISCA Stock
Today began with the news that an analyst from Bank of America Securities had taken a highly bullish stance on DISCA stock. According to a report, Jessica Relf Ehrlich upgraded her rating of the stock from a “neutral” to a “buy.” She also increased her price target to $45 from $34. She classified the stock’s risk/reward ratio as “highly favorable,” but there is an even bigger reason for her upgrade.
What? Discovery’s plans to acquire WarnerMedia from AT&T (NYSE:T), a deal that is expected to close within the next three months.
This type of coverage had an immediate and positive effect on DISCA stock. Shares shot up within the first hour of trading today and as of this writing, are up almost 17%. These gains have pulled the stock into the green by nearly 27% for the week with gains for the month surpassing 25%.
News of this bullish coverage has also sent T stock up. This comes as no surprise, given the unusually high trading volume that the stock experienced when news of the merger was first announced in May 2021.
Why It Matters
None of what we’re seeing this morning is surprising. A positive report from a respected analyst is usually enough to send a stock into the green, but the fact that it was primarily driven by an important merger should be exactly what Discovery needs to propel growth. This type of deal, worth $43 billion, has all the markings of a catalyst that will be regarded as one of the most important mergers of the year.
It is especially important to note that this deal will result in the launching of a new merged entity that will trade publicly. The spinoff will be named Warner Bros. Discovery. On another positive note, investors recently learned that AT&T received a favorable ruling from the IRS, guaranteeing a tax-free deal for shareholders.
For now, this deal promises to yield positive results both for T and DISCA stock. Relf Ehrlich’s report also comes along at a good time for both companies as a new year is kicking off and both will benefit from the market momentum. This may indeed be hailed as the deal of the year.
What It Means
As of now, all signs point to the positive report being correct in its assertions that DISCA stock is destined for growth in 2022. Discovery clearly has its eye on significant expansions for the coming years and acquiring a company as dynamic as WarnerMedia will only serve to boost its already vast viewership and subscriber base.
Unless something interferes with the merger, investors can indeed expect good things from Discovery in the coming year and beyond.
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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