We are updating our Discovery model, raising our target price to $28 on a YE2018 basis from $24 previously, and upgrading the stock from Hold to Buy. While there are many legitimate concerns about the company’s strategic position vs. its peers and around the industry in which it operates, at current trading levels upside potential is too significant to ignore. As well, as a still-relatively smaller player in a consolidating sector, we can imagine benefits to the stock from future M&A activity whether because Discovery is itself eventually bought at a premium or because it acquires other assets and realizes further synergies beyond those generated by the Scripps transaction.
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