David Zaslav

Anjali Sundaram | CNBC

A potential deal with AT&T could give Discovery the scale and firepower to be a major player in the streaming video industry, according to Citi.

CNBC reported on Sunday that AT&T is in talks to merge its WarnerMedia business, which includes HBO, with Discovery to create a new stand-alone company. The deal was not official but could be announced early this week.

Citi analyst Jason Bazinet upgraded Discovery to buy from neutral, saying in a note to clients on Monday that the deal is appealing for shareholders of both companies.