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Consumer discretionary

Time Warner Upgraded At Credit Suisse Due To AT&T Deal

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Analyst believes that U.S. Department of Justice doesn’t have any ground to block the deal

Time Warner Inc (NYSE:TWX) and AT&T Inc. (NYSE:T) announced a few weeks ago about a definitive agreement under which the latter will acquire the former for a consideration of around $85 billion. Following the news, there has been a lot of speculation regarding the approval of the said by regulatory authorities, and the opinion among the analysts regarding the probability of an approval remains divided.

Credit Suisse analyst Omar Sheikh has said in his latest commentary that there is not a single reason that US Department of Justice can use to block the acquisition proposed by AT&T and it is almost certain that it will happen. The analyst expects the department of justice to review the deal, which makes the approval more likely; but even if it were to be forwarded to FCC for a review, the chances of the deal happening will not diminish significantly. The analyst views the transaction as a vertical integration of two companies and it doesn’t in any way disturb the balance of the involved industries.

The analyst put forth the example of Comcast and NBCU deal in 2011 and commented that the dynamics of Time Warner and AT&T are very similar to it. It would make little sense to disallow the said.

Despite being positive that the deal will happen, the analyst commented that if the deal is blocked due to some unforeseen reasons, the upgrade of Time Warner to Outperform from Neutral rating is still justified. The company’s business has been gaining traction and the underlying trends suggest that the downside risk of the stock is very limited in the next few quarters. The price target of Time Warner was reaffirmed at $107.50.

There are 34 analysts rating Time Warner out of which 10 rate the stock as Buy, 7 Outperform, 16 Hold, and only 1 analyst rates it Underperform. The stock traded at a price of $87.74 and gained 1.56% during the session.

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