TD cuts Warner Bros to "hold", citing negative risk-reward balance after deal chatter-driven gains

TD Cowen downgrades Warner Bros Discovery WBD.O to "hold" from "buy" due to an elevated risk profile after a share rally on bid speculation

Warner Bros Discovery's stock down 1.44% in premarket trade to $19.18

The brokerage says there is a reasonably high probability of a bid for the company, although flags limited pool of suitors, with Comcast facing potential higher regulatory hurdles than Paramount Skydance PSKY.O and Sony likely deterred by the required capital commitment

A potential deal's rationale would be "at least as much political as business-related," making standard analysis less useful, broker says

"We don't expect to see other large tech companies choosing to compete with Paramount Skydance (in part because Paramount Skydance's potential synergies with Warner Bros are much higher)," -- TD Cowen

Brokerage notes that while Paramount Skydance may come in with a $20+ bid per share, it doesn't love the risk-reward here given the potential for Warner Bros shares to quickly drop to $11-$12 if the bid doesn't materialize