Paramount Skydance Turnaround Could Take Years To Materialize, Says Analyst

Bank of America Securities initiated coverage on the newly formed Paramount Skydance (PSKY) with an Underperform rating and an $11 price target, citing a projected long and costly integration period marked by significant content spending, persistent streaming losses, and a "rich" valuation relative to peers. Analyst Jessica Reif Ehrlich forecasts 2026 EBITDA of $3.06 billion, substantially below management's $4.1 billion projection, due to factors like the $750 million UFC rights deal and declining linear TV OIBDA, underscoring high execution risk and a need for considerable investor patience.

Analysis

Bank of America Securities has initiated coverage on the newly formed Paramount Skydance (PSKY) with a notably bearish outlook, assigning an Underperform rating and an $11 price target, which suggests significant downside from its current trading price of $15.06. The core of the thesis rests on a protracted and capital-intensive turnaround, drawing parallels to the challenging integration of Warner Bros. Discovery. The analyst, Jessica Reif Ehrlich, projects 2026E EBITDA of $3.06 billion, starkly contrasting with management's more optimistic $4.1 billion guidance. This disconnect is attributed to heavy content spending, including a $750 million deal for UFC rights, and persistent losses in the direct-to-consumer (DTC) segment, which reported a $497 million OIBDA loss in 2024. While acknowledging the potential of PSKY's iconic assets and an achievable $2 billion cost synergy target, the analysis underscores that the stock's current valuation is 'rich' relative to peers like Disney and Warner Bros. Discovery, especially given the secular decline in linear TV OIBDA (at a ~10% CAGR) and the significant execution risks associated with the complex restructuring ahead.

Key Decisions for Investors

• Given the 'Underperform' rating and an $11 price target against a current price of $15.06, investors should exercise extreme caution as the stock is considered richly valued relative to its immediate financial prospects and restructuring risks.
• Monitor management's execution on the $2 billion cost synergy target and the integration process, as the analyst's thesis hinges on a long and difficult turnaround with high uncertainty.
• Scrutinize the DTC segment's performance and cash burn in upcoming reports, as heavy content spending on assets like UFC rights is expected to weigh on near-to-medium-term earnings and delay profitability for Paramount+.
• Investors must weigh the long-term potential of a consolidated media powerhouse against the significant discrepancy between management's guidance and analyst forecasts, which signals a high-risk profile in the near term.