UBS reiterates Sell rating on Paramount Global stock amid box office weakness

UBS maintained its Sell rating and $10.00 price target on Paramount Global (PARA), significantly below the current trading price, citing revised Q2 estimates reflecting flat revenue growth and a 13% EBITDA decline primarily due to weaker box office performance. While UBS projects a substantial decline in the traditional TV segment, it noted significant improvement in the direct-to-consumer segment's EBITDA. This bearish stance from UBS contrasts with Paramount's recent better-than-expected Q1 2025 earnings and Guggenheim's maintained Buy rating, which highlighted strength in the TV Media and DTC segments, underscoring divergent analyst views on the company's profitability trajectory amidst evolving industry dynamics.

Analysis

Paramount Global (PARA) presents a deeply divided analyst outlook, creating a complex picture for investors. UBS reiterates a bearish stance with a Sell rating and a $10.00 price target, a significant discount to the current $12.90 trading level, citing weaker box office performance. The firm has downgraded its Q2 forecast to flat revenue growth and projects a 13% EBITDA decline to $756 million, driven by an anticipated 15% drop in TV segment EBITDA. Conversely, Guggenheim maintains a Buy rating, acknowledging weakness in Filmed Entertainment but emphasizing offsetting improvements in the TV Media and Direct-to-Consumer (DTC) segments. This bull case is supported by Paramount's recent Q1 2025 earnings, which surpassed both revenue and EPS expectations. A key area of consensus is the strength in DTC, with UBS forecasting its EBITDA will surge to $115 million from $26 million a year ago. However, this growth is occurring as the stock trades near its 52-week high with technical indicators suggesting overbought conditions, while the company's overall financial health is rated as just "FAIR" by InvestingPro.

Key Decisions for Investors

• Given the stock is trading near a 52-week high with overbought technical signals, investors should consider the significant downside risk highlighted by UBS's $10 price target.
• The conflicting analyst ratings underscore a pivotal transition; monitor the profitability of the Direct-to-Consumer segment closely, as its ability to offset declines in the legacy TV business is the central thesis for both bulls and bears.
• Despite the recent Q1 earnings beat, the forecast for a full-year EBITDA decline and UBS's projection of an 11% drop in 2025 EBITDA warrant caution, suggesting the current stock price may not fully account for future headwinds.
• The announced $0.05 dividend signals management's commitment to shareholder returns, but investors should weigh this against the weak free cash flow forecast of only $7 million for the second quarter.