Time Warner Inc was reiterated Neutral but the target price goes up to $105 from $90 from broker Wedbush – which also highlighted to shareholders a reason not to vote for Donald Trump in the forthcoming US presidential election.
“AT&T's $107.50 per share, 50-50 cash-stock is almost 20% above our prior PT, a control premium too good for TWX to pass up. Questions about AT&T's strategy now of vertical integration (er, building a better bundle), apparently , escalating regulatory hurdles for those deciding they want to be Comcast when they grow up, and dynastic control of the other large-cap media companies we cover lead us to see this as a one-time TWX bonanza, not the beginning of a big media gold rush. Candidate Donald Trump has tweeted his opposition to the deal,” said Wedbush in a note.
Meanwhile, at least two major ratings agencies have threatened to downgrade Time Warner’s suitor AT&T (NYSE:T).
S&P Global joined rival Moody’s in warning that it may slice AT&T’s credit score by up to one notch because the telecom group’s deal to buy Time Warner will add to its debt.
The New York ratings agency said that it has placed AT&T’s “BBB+” rating on credit watch negative on the heels of its pact to buy media company Time Warner for $85.4bn.
Earlier, Moody’s warned of the same. The company could see its rating cut to Baa2, the second lowest investment grade opinion.
Moody’s estimates the company will face maturities of more than $9bn each year starting in 2018 and that the company’s leverage will climb.
The transaction, which is expected to face an uphill battle to win regulatory approval, could saddle AT&T with as much as $170bn debt when completed.
Time Warner shares were down 2.8% at $86.97 and AT&T down 1.9% at $36.80 on Monday.
Meanwhile, CBS Corp (NYSE:CBS) was reiterated Outperform with target price raised to $73 from $65 by Wedbush in light of Viacom’s (NASDAQ:VIAB) bid for the broadcaster.
“In our updated valuation, we place a 75% probability on a merger, which we assume would be an all-stock transaction. From NA’s letter to the CBS and VIAB boards, we infer that a deal would likely be an all-stock transaction,” the broker said.
CBS shares were down 2.1% at $56.47 while Viacom was down 0.1% at $37.49.