This Most 'Attractive' Media Acquisition Target Worth 'Well Above' MGM's $8.5B Sale To Amazon In A Deal, Analysts Speculate

Needham analyst Laura Martin reiterated a Buy on Paramount Global PARA and a $36 price target.
Martin fine-tuned her quarterly estimates to reflect more robust DTC profits in 3Q22 but weaker DTC profits in 4Q22 versus her prior forecast.
Despite weak scatter pricing, she believes PARA's linear TV business will operate at breakeven in 2H22, aided by solid political ad revenues of $220 million, by her estimate. Linear TV is today's cash cow paying for OTT since PARA does not own Theme Parks.
Contrary to the popular view, she loves PARA's asset mix, including its global linear TV networks, leading FAST channel platform, broadcast stations, and Paramount+.
She believes bundling can lower churn by up to 50% and elevate LTV. PARA has several bundling choices for consumers and advertisers.
She highlights that PARA has multiple revenue streams in its business lines. She believes revenue diversification lowers investor risk, which drives considerable valuation upside.
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The fact that PARA's linear TV business is flat or slowly shrinking does not bother her because it represents PARA's cash cow that funds its high-growth DTC streaming businesses. She believes that to win, SVOD services must have news and sports, which means they must own broadcast TV stations.
After these revisions, she retained her FY22 revenue estimate at $30.6 billion for PARA but lowered her Adjusted OIBDA estimate by about $80 million to $3.48 billion.
PARA is too cheap at current levels, given its sum-of-the-parts value and its takeover attractiveness.
Finally, at a $12 billion market cap, she believes PARA is too small to win the streaming wars. Still, it is bite-size enough to be acquired by a larger streaming competitor for its deep library of film and TV content, sports rights, and news assets. Logical buyers include Amazon.com Inc AMZN, Apple Inc AAPL, Comcast Corp CMCSA & Warner Bros. Discovery, Inc WBD.
The analyst thinks that, besides being small and inexpensive, PARA owns one of the most valuable TV and film libraries in the media business, worth well above MGM's $8.5 billion sale price to AMZN.
Price Action: PARA shares traded lower by 2.63% at $18.62 on the last check Friday.
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