On Tuesday, CFRA upgraded Paramount Global (NASDAQ: PARA) from Hold to Buy, maintaining a price target of $13.00. The firm's decision to raise the stock rating stems from event-driven factors rather than immediate fundamental results. Despite the stock's 24% decline over the past 12 months, the analyst sees potential in the upcoming transaction with Skydance Media and National Amusements, which could lead to significant changes in the company's structure.
The analyst from CFRA has left the EPS estimates for Paramount unchanged at $1.95 for 2024 and $1.65 for 2025, aligning with the consensus estimates of $1.82 and $1.62 respectively. Revenue growth is expected to remain flat during this period. The valuation of the stock is based on a forward TEV/EBITDA multiple of 7.0, which is comparable to Paramount's direct peers.
The upgrade to Buy is partly influenced by the anticipated complex transaction between Skydance Media and National Amusements, the controlling shareholder of Paramount. This deal is expected to close in the first half of 2025. The analyst suggests that the new management may consider divesting certain cable networks, such as MTV Entertainment, Nickelodeon, BET Media, Comedy Central, and Smithsonian Channel.
The future of CBS Television Stations, which operates in ten of the top 25 TV markets, is also uncertain under the potential new management of Skydance. However, the analyst believes that Skydance might retain CBS, its flagship network, as well as Paramount+ for video streaming. This would complement Skydance's own production capabilities, along with Paramount Pictures and Television Studios.
In other recent news, Paramount Global has seen a significant surge in its financial performance. MoffettNathanson has revised its financial forecasts for the media conglomerate, increasing the full-year EBITDA projection for 2024 to $2.8 billion and raising the earnings per share (EPS) forecast by $0.35 to $1.60. This adjustment is largely due to the company's TV Media division's expected positive financial results.
For 2025, the firm predicts a breakeven EBITDA for Paramount's Direct-to-Consumer (DTC) segment, contributing to an overall company EBITDA estimate of $3.0 billion, an increase of $200 million from the previous forecast. The EPS estimate for 2025 has also been raised by $0.26 to $1.35. Despite these upward revisions, MoffettNathanson maintains a Neutral stance on Paramount Global shares.
In other recent developments, Paramount Global's Q3 performance was robust, with a 25% year-over-year revenue increase driven by the addition of 3.5 million subscribers to its Paramount+ platform. The company's Adjusted Operating Income Before Depreciation and Amortization (OIBDA) improved, reaching $858 million in Q3, a 20% increase from the previous year.
Looking forward, Paramount Global anticipates achieving domestic profitability in Paramount+ by 2025, with cost reductions expected to yield $500 million in annual savings.
InvestingPro Insights
Recent data from InvestingPro provides additional context to CFRA's upgrade of Paramount Global. The company's Price to Book ratio of 0.45 as of the last twelve months ending Q3 2024 suggests that the stock may be undervalued, aligning with CFRA's decision to upgrade the stock to Buy. This is further supported by an InvestingPro Tip indicating that Paramount is trading at a low Price / Book multiple.
Despite the challenges reflected in the 20.39% price decline over the past year, InvestingPro data shows a recent positive trend with a 7.65% price return in the last week. This short-term momentum could be linked to investor optimism surrounding the potential structural changes mentioned in the CFRA analysis.
An InvestingPro Tip highlights that 11 analysts have revised their earnings upwards for the upcoming period, which may support CFRA's maintained EPS estimates and the overall bullish outlook. For investors seeking a more comprehensive analysis, InvestingPro offers 8 additional tips for Paramount Global, providing a deeper understanding of the company's financial health and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.