Shares of Paramount Global Class B (NASDAQ:PARA) jumped over 7% in extended trading yesterday after the company reported better-than-expected second-quarter Fiscal 2023 results. What’s more, the company announced the sale of its publishing house, Simon & Schuster, to KKR & Co. (NYSE:KKR) for $1.62 billion in cash. After a years-long search for a buyer and previous failed attempts, Paramount finally decided to sell its legacy book publishing house to KKR.
The corporation continues to struggle due to streaming losses and falling advertising revenues. However, it expects streaming losses to peak this year and the advertising business to improve steadily going forward. The sale proceeds from Simon & Schuster will help Paramount deleverage its balance sheet, add financial flexibility, and create long-term shareholder wealth. Year-to-date, PARA stock has lost 4.3%.
Paramount’s Q2 Results in Detail
Paramount posted adjusted earnings of $0.10 per share. In Q2FY22, Paramount Global posted a much higher adjusted earnings figure of $0.64 per share.
Moreover, revenue of $7.62 billion surpassed analysts’ estimates of $7.44 billion. Even so, revenues fell marginally by 2% compared to the prior-year period. Under Paramount’s Direct-to-Consumer channel, advertising revenue grew 21%, Subscription revenue rose 47%, and Paramount+ revenue jumped 47% compared to the prior-year period. Notably, Paramount+ subscribers grew to 61 million during the quarter.
Meanwhile, TV Media revenue fell 2% year-over-year to $5.16 billion as the company’s TV subscriber base continued to fall. Finally, revenue from Filmed Entertainment declined 39% compared to the prior year period to reach $831 million.
Commenting on the performance, President and CEO Robert Bakish said, “As we look forward, we will continue to be guided by our content-first approach and seek to maximize its value across platforms and revenue streams, while also operating with the utmost efficiency through this year of peak streaming investment.”
What is the Prediction for PARA Stock?
Following PARA’s Q2 print, Goldman Sachs analyst Brett Feldman reiterated a Sell rating on PARA stock. Feldman is encouraged by Paramount’s outlook for its streaming service, Paramount+, with average revenue per user growing by 20% or more in 2024. Having said that, a slow recovery in TV Media’s advertising revenue remains a concern for the analyst.
Wall Street is cautious about PARA’s stock trajectory and prefers to remain on the sidelines for now. On TipRanks, PARA stock has a Hold consensus rating based on six Buys, four Holds, and six Sell ratings. The average Paramount Global Class B stock prediction of $19.14 implies a nearly 19% upside potential from current levels.
