Add Wells Fargo and Wolfe Research analysts to the growing list of Wall Street experts who have turned bullish on Warner Bros. Discovery.

Last April saw the creation of the merged Warner Bros. Discovery followed by various cost-cutting challenges for the management team led by CEO David Zaslav, causing a sharp drop in the stock. This year, however, has seen the likes of Goldman Sachs, Bank of America and Guggenheim Securities upgrade their ratings on the entertainment conglomerate’s shares. And management’s focus on free cash flow, debt reduction and reducing losses in the streaming business with an eye on turning it profitable has had various Wall Street experts raise their Warner Bros. Discovery stock price targets.

Wolfe’s Peter Supino joined the parade of WBD bulls on Friday, upgrading the stock from “peer perform” to “outperform” and setting a price target of $20, after previously listing it as NA for “not applicable,” in a report entitled “Finding Their Sea Legs.”

Why the upgrade now? “Almost a year post-merger, guidance and the stock are lower, while internal visibility is higher,” the analyst explained, echoing others’ recent commentary that the company had put the worst behind it and was turning a corner. “We expect execution, free cash flow generation and debt-to-equity value transfer to improve from here.”

While traditional TV networks units are being hit by Hollywood’s streaming pivot, investors may be too bearish on WBD’s outlook here, the Wolfe expert also suggested, sharing: “We’re bearish on the linear pay-TV outlook, but the (company’s) networks generate lots of cash and will for many years.” 

Arguing that “the skeletons in Warner’s closet have been accounted for,” Supino concluded: “After a ’22 rife with negative surprises around the Warner-Discovery integration and TV advertising market, and after two rounds of forecast reductions, today’s expectations are attractive to underwrite.”

Meanwhile, Wells Fargo’s Steven Cahall upgraded his WBD rating from “equal weight” to “overweight” on Friday, while boosting his stock price target by $7 to $20. For him, it was mostly about assessing the downside risk to debt reduction efforts.

“Good Times or Bad Times, This Stock De-Leverages,” he summarized the findings of his debt stress testing in the title of his report. “While recent macro events might make levered equities seem worse, we’ve been trending more positive on WBD due to synergies and execution,” he explained. “We threw everything and the kitchen sink at a downside case scenario for WBD, and it still delevers.”

Cahall emphasized that his team now has real “conviction in free cash flow to limit downside.” After all, WBD recently rejigged its executive pay to incentivize debt reduction and strong free cash flow.

Cahall’s conclusion: “The new WBD is emerging with strong free cash flow, a tactical approach, greater command and control, and excellent HBO content.”