Paramount Skydance Turnaround Could Take Years To Materialize, Says Analyst

Core Viewpoint - Paramount Skydance faces a challenging and costly turnaround as it integrates Skydance and Paramount Global, with analysts indicating that execution will take years [1][2]. Group 1: Integration and Restructuring Challenges - The merger of Skydance and Paramount closed on August 7, 2025, after a lengthy regulatory review and years of sale attempts, leading to operational challenges due to prior underfunding [3]. - Analysts draw parallels to Warner Bros. Discovery's prolonged integration, suggesting that Paramount Skydance will encounter a similarly complex restructuring path [2]. Group 2: Financial Outlook and Projections - Bank of America Securities analyst Jessica Reif Ehrlich initiated coverage with an Underperform rating and a price forecast of $11, citing significant investment needs and the requirement for investor patience [1][2]. - Ehrlich forecasts a calendar 2026 EBITDA of $3.06 billion, which is significantly below management's projection of $4.1 billion, influenced by the $750 million UFC rights deal and modest subscriber growth [6]. Group 3: Cost Management and Synergies - Management has set a target of $2 billion in cost savings to help offset heavy content spending, which is seen as achievable based on recent industry precedents [5]. - However, incremental rights costs and unprofitable streaming are expected to weigh on near-to-medium-term earnings [5]. Group 4: Market Position and Valuation - The stock is currently trading at a premium compared to peers like Fox, Disney, and Warner Bros., with the valuation considered "rich" given limited financial visibility and challenges in linear TV [6]. - Linear OIBDA is declining at approximately 10% CAGR, raising concerns about the sustainability of CBS's sports and news importance [7]. Group 5: Content Spending and Strategic Moves - Recent high-priced deals for content rights, such as South Park and UFC, indicate that management will aggressively spend to stabilize and grow the platform, which may create near-term financial drag [8].