Media company Paramount Global PARAPARAA reported first-quarter financial results that saw revenue miss Street consensus estimates and earnings per share come in ahead of estimates. The company also announced a CEO change with Bob Bakish stepping down.
Analysts react to the report and what’s next for the company.
The Paramount Analysts: Bank of America analyst Jessica Reif Ehrlich had an Underperform rating and $9 price target.
KeyBanc Capital Markets analyst Brandon Nispel had a Sector Weight rating and no price target.
Needham analyst Laura Martin issued a downgrade from Buy to Hold and no price target.
Benchmark analyst Daniel Kurnos had a Buy rating and $19 price target.
Bank of America on Paramount: The first-quarter earnings report and conference call left a lot of unanswered questions, Ehrlich said.
"Concurrent with the company's highly anticipated 1Q earnings release, Paramount Global announced their CEO, Bob Bakish, is stepping down and being replaced by a 3-person team of George Cheeks, Chris McCarthy and Brian Robbins," Ehrlich said.
The analyst said there was no update from the company on its ongoing potential merger activity. Ehrlich said questions remain that include who is making the strategic decisions at the company, what the timing of a potential sale looks like and what direction the company would take if it doesn't reach a strategic transition.
"Given the lack of transparency, we believe it is challenging to handicap the potential outcomes. As a result, we believe shares will remain volatile subject to press reports."
KeyBanc on Paramount: In a new investor note, Nispel asks if Paramount is a "Takeover, or a Take-Under."
The analyst said results were mixed with revenue coming in below Street consensus estimates.
"However, with a Skydance deal on the table, results don't matter much, nor does the strategy of the ‘Office of the CEO,' who did not take questions," Nispel said.
The analyst said that Class B shareholders of Paramount could be left "holding the bag" if the company merges with Skydance. News of a $3 billion contribution from Skydance from Monday could see Class B shareholders fare better at around $14 per share according to Nispel's estimates.
"Given we see a range of outcomes that could value PARA at $14 or $4/sh, we prefer to sit this one out."
Needham on Paramount: Rising uncertainty at Paramount saw Martin downgrade shares.
"PARA's 1Q24 conference call was over in 9 mins, and they took no questions," Martin said.
The analyst said uncertainty now stems from a shift of a CEO to a committee of 3, risks of the upcoming Charter renewal and the forward strategy for the company.
"We've never heard anyone argue that a committee of 3 is better at creating value for shareholders or employees than a single leader with Board accountability."
Martin also said there is a risk at the May Upfront Market with Bakish gone and the company selling around 50% to 70% of its ad units during the event.
The analyst said the new leadership drama does not increase value for shareholders.
"The lack of a clear strategic direction makes it difficult to assess value for investors."
Martin recommends investors move to the sidelines until the company discloses how it will grow revenue and earnings over the next three years.
Benchmark on Paramount: The short conference call and CEO change could show that a deal between Paramount and a suitor is "imminent," Kurnos said in a new investor note.
"Profitability was outstanding in the quarter, especially in TV Media and DTC, but how much of that was pre-merger cost cuts vs. organic savings is anyone's guess," Kurnos said.
The analyst said Paramount remains in limbo until there is more clarity on a deal.
"We have a more optimistic view of the value of ‘Skymount' relative to the general consensus."
Kurnos also questioned how much of the first-quarter results were boosted by Super Bowl LVIII, which provided a bump to advertising revenue and Paramount+ subscribers.
The analyst said all signs point to a deal with Skydance with a potential deal with Sony and Apollo facing potential regulatory and funding issues.
"Sit back, grab your popcorn, and enjoy the rest of the show."
PARA Price Action: Paramount shares are down 4.12% to $11.75 on Tuesday versus a 52-week trading range of $10.12 to $24.
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