Paramount Analysts See Mixed Short-Term Outlook, Much Depends On How Ad Market Fares

Benchmark analyst Daniel Kurnos reiterates Paramount Global PARA with a Buy and a $28 price target.

The has been a wild ride for Paramount this year, punctuated by a messy first-quarter print.

It led to another reset of expectations and sparked further speculation of a forced sale, perpetuating the narrative that Paramount cannot compete as a standalone entity in the streaming universe.

And yet, the entire industry has migrated towards Paramount’s monetization ecosystem, with Paramount also recording nearly 80 million global DTC subscribers in 2022, another 10 million net adds projected in 2023, and still owning 12 of the top 20 shows during the 2022-2023 TV season. 

He expects Paramount to benefit from a rebound in licensing as he settles back into a more balanced AVOD/SVOD mix, with DTC ARPU beginning to accelerate thanks to price hikes and better ad monetization. 

The short-term outlook for Paramount is decidedly mixed. On the one hand, expectations have once again come in significantly, while organic comparisons begin to get materially easier in the back half of the year. The analyst lowered his 2023 forecast. He believes that incremental cost saves and DTC ARPU gains could produce some modest upside, but he acknowledges that much will depend on how the ad market fares. 

He remains confident that, again, in even just slightly better conditions, there could be a significant upside to the street in 2024, with some incremental FCF risk related to the writers’ strike.

Needham analyst Laura Martin reiterates Paramount Global with a Buy and a $28 price target.

Although she retains her FY23 quarterly revenue estimates, she lowered her OIBDA and EPS estimates for FY23 to reflect higher filmed entertainment EBITDA losses in 2Q23 and FY23, lower TV Media OIBDA in 2Q23, higher corporate eliminations in 2Q23, and higher SBC expenses in 2Q23 and FY23.

In May, the company reported a first-quarter FY23 revenue decline of 1% year-on-year to $7.265 billion, missing the consensus of $7.420 billion.

Adjusted EPS of $0.09 missed the consensus of $0.17.

Price Action: PARA shares traded lower by 2.86% at $15.80 on the last check Tuesday.