Paramount Global (NASDAQ: PARA) Downgraded by CFRA to Hold, Merger with Skydance Media Raises Concerns
In a recent development, CFRA downgraded shares of Paramount Global (NASDAQ: PARA) from Buy to Hold, with a revised price target of $12, down from the previous $16. This adjustment is based on a forward TEV/EBITDA multiple of 6.9 times the firm's 2025 EBITDA estimate of $2.93 billion, significantly lower than the company's historical average and that of its peers.
The downgrade comes amidst Paramount Global's merger with Skydance Media, which involves the acquisition of 100% of National Amusements, Inc. (NAI), a controlling shareholder of Paramount. Existing public Class B shareholders of Paramount will receive a cash offer of $15.00 per share, up to a total of $4.3 billion, or one new Paramount Class B share for each existing share they own.
While CFRA remains cautiously optimistic about Paramount's potential to meet financial targets in the future, Loop Capital and Goldman Sachs have maintained Sell ratings on the stock due to challenges in the company's traditional business operations.
Furthermore, Paramount Global's co-CEOs are set to present their strategy to shareholders, as discussions about a potential merger with Skydance Media continue. Edgar Bronfman Jr. and Bain Capital have also shown interest in acquiring National Amusements, the controlling shareholder of Paramount, with a potential bid estimated between $2 billion to $2.5 billion.
In light of these developments, InvestingPro Insights provide additional context for investors, highlighting Paramount Global's low Price / Book multiple, recent return performance, dividend history, and analysts' concerns about profitability. To access exclusive market analysis and insights, InvestingPro is offering a discount on yearly Pro and Pro+ subscriptions with coupon code PRONEWS24.
Analysis:
Paramount Global's recent downgrade and merger news have raised concerns among investors and analysts. The company's financial outlook is uncertain, with conflicting opinions from different rating agencies. While there is potential for growth with the merger, caution is advised due to the competitive nature of the industry.
Investors should closely monitor Paramount Global's progress in the coming years to evaluate the impact of the merger and other strategic decisions on the company's financial health. Exclusive insights from InvestingPro can provide valuable information to inform investment decisions and navigate the changing landscape of the media industry.