Zhitong Finance learned that at least three Wall Street institutions retain the rating of the company before Warner Bros. Discovery Channel (WBD.US) announces its second quarter financial report next month, although their views on its growth potential vary.

This mass media and entertainment conglomerate owns valuable assets, which is one of the main reasons why Wall Street analysts have not turned bearish, but its huge debt burden of nearly $40 billion is staggering.

Investors will also focus on the impact of Warner Bros. Discovery Channel recently losing the NBA broadcasting rights.

Bank of America reiterated its "buy" rating on Warner Bros. Discovery Channel, but lowered its target price from $14 to $12.

Bank of America said on Tuesday that although it is concerned about the company's stock price decline, the full value of the merger with Discovery has not yet been realized, and the current asset portfolio is not effective. Bank of America believes that many of Warner Bros. Discovery Channel's assets are "best in class," and that the sale, restructuring, and/or merging of Discovery will create "more shareholder value".

Bank of America said: "Assuming that Warner Bros. Discovery Channel can spin off its DTC and Studio assets into an independent company that is not bound by heavy debt burdens, and leaving most of the debt of the cable assets to the remaining entity. This is likely to have a negative impact on the company's debt, but in our opinion, this will greatly increase its equity value."

UBS reiterated its "neutral" rating on Warner Bros. Discovery Channel, but lowered its target price from $11 to $9.

UBS analysts revised down their box office revenue expectations for Warner Bros. Discovery Channel on Monday, expecting ticket sales to remain soft, but the expectation remained basically unchanged. The good news for the company is that cost-cutting efforts will help slow the decline of its network business, while DTC's profitability will improve. The negative news is that the loss of long-tail network and sports content reduction will damage joint income, lead to weak user growth of DTC, and may put greater pressure on EBITDA than expected.

"We expect second-quarter performance to show that the HSD EBITDA of the network business will continue to decline, and DTC will recover with a slight loss, but cash flow will remain stable... We now expect second-quarter EBITDA to be $1.97 billion (previously $2.14 billion), and the full-year forecast to fall to $9.5 billion (previously $9.7 billion)... One key factor in revenue adjustments is the renewal of the NBA, recent news reports indicate that there will be solutions in the next few weeks."

UBS added, "Successful use of matching rights could bring additional pressure to EBITDA, while losing rights adds uncertainty to the prospects of associated companies." UBS expects the company's second-quarter revenue to be close to $10 billion, and revenue to reach $40.8 billion by 2024.

Benchmark reiterated its "buy" rating on Warner Bros. Discovery Channel and maintained a target price of $20.

The company completed its merger with Discovery in April 2022, and its stock price has been difficult to rise since then, but Benchmark analysts hope that the merged company can realize the transition of value next year.

Benchmark believes that Warner Bros. Discovery Channel's current stock price ignores annual cost savings of more than $5 billion, the development momentum of DC Studios led by James Gunn and Peter Safran, the recent profitability of DTC, and the potential improvement space of CNN led by senior personnel Mark Thompson.

On the issue of losing the NBA broadcasting rights to NBC Universal, Benchmark said that the company's annual bid should be comparable to the reported $2.5 billion, even if this may dilute EBITDA by 5% in 2026, and called it an "inevitable disaster", especially considering the long-term profitability prospects of its streaming assets.

Unlike Bank of America's multiple strategic choices to release value, Benchmark still insists on saving the value of cable networks through optimized streaming and digital monetization, rather than through heavily indebted spin-offs.

The research firm praised Warner Bros. Pictures, Max/HBO and CNN as "gems on the global media asset crown ", but emphasized that the recovery of stock prices also depends on the alleviation of erosion of cable network value.

Benchmark said in the report: "Media executives often reflexively turn to mergers and financial engineering to solve operational business problems, although we believe that no solution to Warner Bros. Discovery Channel's problems is actually feasible."

Warner Bros. Discovery Channel has risen every trading day so far this week, up 4.26% on Wednesday to $8.32. So far this year, the stock has fallen nearly 28%, while the S&P 500 index has risen 17% over the same period.