Paramount Global Stock: Bright Future Prospects

Paramount Global (PARA), formerly known as ViacomCBS, is an American-based media and entertainment company that creates content for audiences around the world. We are bullish on the stock.

PARA operates through several segments such as TV Entertainment, Cable Networks, and Filmed Entertainment segments. It runs television and radio stations, produces and syndicates television programs, and is into broadcasting, book publishing, online content creation as well as outdoor advertising.

The stock has been again going through a pretty rough patch since last year. After reaching a 52-week high of $101.97, PARA has lost a significant portion of its value and is currently trading only at $35.44.

The good thing is that the company has been restructuring itself and has several plans to increase its subscriber base. However, despite all the efforts, the market is still not completely optimistic about the company’s success.

This is mostly because, in its latest financials, the company failed to disclose the bottom-line results of its streaming business, thereby making the market believe it is still losing its money. A few analysts are not happy with the company’s performance and have downgraded its stock recently.

The company decided to rebrand itself as Paramount Global recently. Although this move created a buzz in the market, it didn’t benefit the stock. PARA’s overall performance was also not satisfactory, and within hours of declaring its results, the company’s shares started trading in negative territory.

Paramount is taking a series of interesting steps to get hold of a leading position in the market, but still, there is not much data to prove the company’s success in the market. 

Benjamin Swinburne, a Wall Street Analyst from Morgan Stanley, has a similar opinion on the Paramount stock and has given a Hold rating on its shares. Moreover, he lowered the price target on this stock from $42 to $37 in December.

Key Financial Numbers

The Fiscal 2021 fourth-quarter financials of Paramount received mixed responses from the investors. This is because though the company had made some excellent achievements during the quarter, it failed to meet the earnings estimates of a certain segment of investors in the market. 

The best thing noticed in the company’s earnings report was the record 9.4 million increase in the global streaming subscribers translating to a whopping 84% year-over-year growth.

Though Paramount’s overall revenue for the quarter showed a mere 16% year-over-year growth, its streaming service segment stood out from the rest of the segments showing a 48% year-over-year growth driven by the strong growth in subscription and advertising sectors.  

Moreover, due to the heavy investment made in Paramount+, the company’s overall expenses increased to some extent leading to a 73% year-over-year increase in its overall adjusted OIBDA for the year, which came negative.

Yet, the company’s liquidity seems quite sound, as it had $6.3 billion in cash and cash equivalents by the end of December 2021, along with a committed $3.5 billion in undrawn revolving credit.

Wall Street’s Take

Turning to Wall Street, PARA has a Moderate Buy consensus rating. That’s based on eight Buys, eight Holds, and one Sell rating assigned in the past three months. The average Paramount Global price target of $41.06 implies 15.9% upside potential.

Analyst price targets range from a low of $29 per share to a high of $60 per share.

Interesting Future Plans

The primary reason for which many are bullish on Paramount stock is its amazing set of restructuring plans. Out of all the things stated, the biggest announcement was regarding its change in name.

Besides that, the company said it wants to develop a franchisee model in the coming years and also wants to churn out a vast range of movies and television series. By the start of this year, it wants to film a fourth mainline Star Trek feature film and a prequel TV series Star Trek: Strange New Worlds. Though its expenses might increase in the process of enhancing the quality of production, in the long term, it will only benefit the company.

Most importantly, by the start of 2024, it wants Paramount+ to become the new Pay One television window for its Paramount Pictures’ new theatrical releases.

Also, its Showtime OTT will be combined with Paramount+ in a single streaming offering which will start at $12/month for an ad-supported offering. The ad-free version will, however, come at $15. This facility will also let the users change their subscription from within the Paramount+ app while Showtime will continue to be available on a stand-alone basis.

Demand for Online Content

During the past few years, especially since the pandemic, there has been a huge surge in demand for online content. It is being said that the global entertainment and media market could grow at a CAGR of 8.9% to become a $5.1 billion industry by 2030. Therefore, this growing interest in the over-the-top (OTT) platforms will provide a significant growth opportunity to the entertainment companies like Paramount Global.

There’s no doubt that the industry is full of cutthroat competition, but Paramount Global is a big player in the entertainment world and can capitalize on this growing demand for high-quality online content.

Conclusion

Paramount Global stock might be suffering now, but we think the company has a decent shot in 2022. The entertainment world has a lot to offer, and to capture a greater market, the production of high-quality content is surely a good idea. Therefore, considering the company’s future prospects and the current price level at which its stock is trading, it seems that Paramount stock is a Buy. 

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