There’s no doubt that Paramount (NASDAQ:PARA) has been struggling for the last several months, and that’s mainly caused by an ongoing series of merger and acquisition (M&A) related scuffles and assorted crises of leadership caused mainly by Paramount’s chief shareholder, Shari Redstone. But is there a path to victory here for Paramount? What measures will be required to get there? The answer, as is commonly the case, might be more complex than you’d think. But given the latest reports that it’s just hit a low not seen in almost five years, it’s clear something needs to be done.
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No Shortage of Handicaps Crippling Paramount Right Now
Paramount has no shortage of handicaps crippling it right now. Its primary stock in trade is content, and that pipeline is only just getting straightened out again after multiple labor strikes from the actors’ and writers’ guilds. Oh, and there’s a whole other potential crimp about to hit as the International Alliance of Theatrical Stage Employees (IATSE) still has a contract outstanding.
Negotiations have been going on in earnest since last May, and as of now, there’s no agreement set up. Reports noted that the IATSE is “confident” an agreement can be reached, but if it isn’t reached soon, then another strike may hit right at a time when production is actually getting back up to steam.
Beyond that, however, Paramount has to deal with the fact that its linear television properties—including CBS, MTV, Comedy Central, and several others—are in steady decline. Back in May, a report revealed that more people were watching YouTube on a typical day than were watching Paramount networks. In fact, Nielsen reported that Americans spend about 10% of a typical viewing day watching YouTube instead of linear content in general.
Cable channels still represent about 29% of the viewing day, but YouTube is walking it to the streamers. Even Netflix (NASDAQ:NFLX) can only muster about 7.6% of that viewing day by itself. And that’s a reversal from as recently as November 2023, when Paramount was getting more viewers than YouTube.
The Path to Victory
So, we see here that Paramount has several major impediments here. How does it work around them? We start simply, right at the root: Shari Redstone.
Shari Redstone has killed what amounted to three deals with Skydance Media. The first one was lost back in May when Skydance’s exclusivity period ran out. Then, there was a deal that followed, which was quickly sweetened after the reveal, so I count that as two separate deals. She’s also killed a deal with Sony (NYSE:SONY) and Apollo Global Management (NYSE:APO).
There are other deals lurking in the background, like the ones with Steven Paul and John Paul DeJoria or with Edgar Bronfman. In addition, there’s an outside deal in the works with Byron Allen, but no one’s mentioned Allen in connection with this deal since May, and his current status is largely unknown.
Regardless, the clock is ticking on this one. With Moody’s about to lower the hammer on Paramount by declaring its debt as junk status, that means a potential disaster brewing. And since Redstone has kind of made a hash out of relations with investors—given that at one point investor Mario Gabelli was poised to sue Paramount if the latest Skydance deal went through—getting a deal of any sort made is going to be that much harder.
The answer seems to be to make a deal with Paramount and accept no deal that seeks to pick up National Amusements. Make the deal with Paramount’s stockholders. Class A and Class B alike. No end runs and no dodges. Just make the deal, and make it quickly while there’s still something left of Paramount.
What Is the Projection for Paramount Stock?
Turning to Wall Street, analysts have a Moderate Sell consensus rating on PARA stock based on two Buys, seven Holds, and eight Sells assigned in the past three months, as indicated by the graphic below. After a 37.68% loss in its share price over the past year, the average PARA price target of $11.90 per share implies 23.83% upside potential.
