Paramount Ad Slump, Streaming Losses Prompt Analyst To Cut Price Forecast

JPMorgan analyst David Karnovsky maintained Paramount Global PARA with an Underweight and lowered the price target from $11 to $10 on Wednesday.

Last week, Karnovsky held fireside chats with thirteen companies at JPMorgan’s Global TMC Conference in Boston. The analyst covered key short-term and long-term takeaways across live entertainment, ad agencies, outdoor advertising, digital publishing, and broadcasting, including some themes emerging from first-quarter earnings.

Karnovsky noted that PayTV declines continue to be a substantial headwind. While DTC execution has been solid, the analyst expected losses through 2026, which would weigh on total company OIBDA and free cash flow.

Also Read: Paramount’s Super Bowl Boost And Studio Strength Help Offset Streaming Miss: Analyst

While Karnovsky liked Paramount’s cost-cutting efforts, focus on DTC profitability, and the decision to improve the balance sheet, he maintained his Underweight rating given the company’s valuation premium versus peers, lack of scale in DTC, linear exposure, and macro uncertainty.

Paramount’s first-quarter OIBDA exceeded the analyst’s expectations ($688 million versus Karnovsky’s $649 million). Still, he reduced fiscal 2025 consolidated OIBDA to $2.81 billion (-9.9% versus the prior 5.6%) on reductions in TV Media. The analyst reduced second-quarter TV Media advertising to $1.62 billion (-6.5% versus prior -5.0%), down from a flattish underlying trend in the first quarter, reflecting fewer sports inventory.  

Given political and international true-up comps, he expected the ad decline to worsen in the third and fourth quarters, but now estimates fiscal 2025 TV Media advertising of $6.91 billion (-15.6% versus prior -17.5%) after flowing through the beat in the first quarter.

Karnovsky estimated that first-quarter TV Media OIBDA ex-Super Bowl was down ~17% and now forecasts similar declines in the second and third quarters, bringing his fiscal 2025 TV Media OIBDA estimate to $3.46 billion (-20.5% versus prior -14.8%).

At DTC, the analyst decreased his fiscal 2025 Advertising estimate to $2.06 billion (-2.6% versus prior +8.3%) after the miss in the first quarter and Paramount+ strength being offset by softness at Pluto driven by supply. Positively, Karnovsky increased his fiscal 2025 Subscription estimate to $6.46 billion (+17.3% versus prior +14.8%), reflecting prior price increases flowing through, and raised fiscal 2025 DTC OIBDA to -$96 million (prior -$158 million).

Karnovsky had an Overweight on Walt Disney Co DIS with a price target of $130.

The analyst noted that the company raised EPS guidance, and management confirmed the long-term outlook of double-digit growth could be applied on a higher base. Disney+ net adds returned to growth, and Hulu net adds were above 1m for the second straight quarter, reflecting not only strong content but also platform improvements and traction on password sharing.

Disney appears to be navigating macro headwinds well, with sports advertising strong and the operating income guide for Experiences moving to the higher end, Karnovsky said. The stock has outperformed post-print, but at 17.5 times Karnovsky’s fiscal 2026 EPS, it looks attractively priced relative to the market at 20 times.

Price Action: PARA stock is up 0.50% by $11.88 at last check Wednesday.

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