BofA Securities: Discovery shares could climb to $45

Discovery Inc (NASDAQ: DISCA) has had a fantastic start to the year with the stock up nearly 25% already, but BofA Securities says it’s just a trailer of what is to come later this year.

Discovery upgraded to ‘buy’ at BofA Securities

In a note on Friday, BofA Securities’ Jessica Reif Ehrlich upgraded Discovery to “buy” with a price target of $45 that represents a 50% upside from here. Previously, she had a PT of $34 on the stock.

The bullish call is primarily based on Discovery’s pending merger with WarnerMedia that she expects will create the most dynamic global media company. The analyst wrote:

The $43 billion deal is expected to complete by mid-2022. Also on Friday, Brahman Capital Corp increased its stake in Discovery from 1.76% to 5.26%, as per data from FactSet.

Discovery has a favourable risk/reward ratio

According to Ehrlich, Discovery has a favourable risk-to-reward ratio, and the merger will open new doors of incremental revenue for the combined entity. She added:

Streaming is a competitive space, especially since the onset of the COVID pandemic. Yet, Discovery CEO David Zaslav expects the newly launched direct-to-consumer streaming service, Discovery+, to rival established giants like Netflix and Disney+ globally.

Earlier this week, Wells Fargo’s Steven Cahall also said Discovery should be on everyone’s radar for 2022.