Time Warner Inc: Why TWX Stock Is on Fire

TWX StockThis Means More Gains for Time Warner Stock

Time Warner Inc (NYSE:TWX) stock has been racing ahead on the news of the acquisition deal with AT&T Inc. (NYSE:T). TWX stock gained about eight percent in the last trading session and closed at $89.48, inching closer to its 52-week high of $94.44.

The deal was announced on Saturday by the two companies, wherein AT&T will pay $107.50 per share in a cash-and-stock transaction to acquire the media heavyweight. The deal would mean Time Warner gets to reach more customers through AT&T’s mobile network, and AT&T gets to own premium content from providers like HBO, CNN,  and Warner Bros., which Time Warner owns.

The increasing convergence of media and telecommunications industries has brought many opportunities for certain companies. With consumers moving toward services like Netflix, Inc. (NASDAQ:NFLX) and Hulu, LLC, there is a huge opportunity for wireless companies to deliver content in various formats, using multiple distribution channels. This deal shall build an entity capable of delivering the best premium content to every screen, in whatever format desired by the consumer. This is likely to keep Time Warner stock in the limelight.

However, the big challenge is to prove that such a deal would not lead to unfair pricing or hurt competition, as claimed by a section of analysts and consumer groups. The onus is on AT&T to prove that the move is to meet the rising consumer demand for mobile video, which can be effectively handled through this “vertical integration,” as AT&T and Time Warner are not competitors.

Any doubts regarding the closure of the deal would push TWX stock down.

This deal, if closed, shall take AT&T CEO Randall Stephenson closer to transforming his telephone company into a media conglomerate. Stephenson believes that video will be the new source of growth, and that buying Time Warner will provide a hedge against increasing programming costs. (Source: “The Making of the AT&T-Time Warner Deal,” The Wall Street Journal, October 23, 2016.)

The deal is a reflection of the changing media landscape in which mobile video holds huge possibilities. Donald Trump, the Republican U.S. presidential candidate, has questioned the deal, saying it would limit competition and hurt consumers.

All eyes will be on how AT&T handles the regulatory hurdles to prove that the combined company is positioned to create new customer choices, from content creation and distribution to a mobile-first experience. This will determine the future direction of Time Warner stock.

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