Shares of newly merged company Paramount Skydance (PSKY) fell 2.9% on Thursday after two Wall Street analysts issued “Sell” ratings on the stock.
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Barclays analyst Kannan Venkateshwar maintained his $8 price target, implying a massive 55.5% downside potential from current levels.
At the same time, UBS analyst John Hodulik reaffirmed his Sell rating but raised his price target from $10 to $12, implying 33.2% downside potential.
Both analysts remain cautious about the Paramount Skydance merger, pointing to ongoing industry challenges like the steady decline in traditional TV viewership. Yet, PSKY stock has surged nearly 74% so far this year, driven by a series of positive developments, especially the merger.
Barclays Remains Bearish on Entertainment Stocks
As part of a sector review, Venkateshwar issued “Buy” ratings only on Spotify (SPOT) and Walt Disney (DIS) shares, while maintaining “Hold” ratings on other media names.
Paramount Skydance was his only “Sell,” as Venkateshwar remains skeptical about the merged company’s performance and potential challenges ahead, including the ability to integrate operations and execute new content strategies effectively amid intense competition.
UBS Flags Content Spending Risks
Hodulik raised his price target in light of the merger but remains concerned about Paramount’s aggressive content spending and challenging media outlook. Notably, Paramount has committed to a $7.7 billion, seven-year deal for exclusive U.S. streaming rights to the Ultimate Fighting Championship (UFC) and a $1.5 billion agreement with “South Park” creators, Trey Parker and Matt Stone.
He also acknowledged the company’s efforts to streamline its streaming services and cut costs in legacy segments, targeting $2 billion in savings, or about 7% of combined operating expenses. However, Hodulik noted that more than 90% of Paramount Skydance’s revenue still comes from legacy Paramount businesses, largely dependent on linear TV and general entertainment, which could hinder long-term growth prospects.
Is PSKY a Good Investment?
On TipRanks, PSKY stock has a Hold consensus rating based on two Buys, nine Holds, and six Sell ratings. The average Paramount Skydance price target of $12.25 implies 31.8% downside potential from current levels.
