Although Paramount Global Inc. has significant video streaming assets, a “crumbling” of the larger linear TV ecosystem has one former bull doubting the Paramount stock (NASDAQ:PARA) prospects.
Wells Fargo Analyst on Paramount Stock
Steven Cahall of Wells Fargo cut Paramount stock (NASDAQ:PARA) to equal weight from overweight on Tuesday, lowering his price objective to $19 from $40.
He stated, “We’ve been bullish on PARA’s content and streaming execution.” “While those features have trended positively—and kudos to management—it increasingly appears like a narrow view of the company.”
He went on to say that he’s “increasingly concerned about the linear ecosystem across media, which removes insight into what we were betting for as bulls: a trough in profitability with streaming driving growth on the other side.”
Linear television is the conventional kind of television that is planned and viewed regularly through satellite or cable rather than being delivered to a single user on demand.
Cahall’s downgrading of the media and entertainment firm was accompanied by a cautious assessment of the overall condition of the conventional media sector. Cahall cautioned in that research that the linear economic model might “collapse fast,” a tendency that could compel media companies to make difficult choices. According to him, some of the large names will have to decide whether to reduce their investments, forego certain athletic rights, or seek industry consolidation.
“Sports rights may not be tenable for all existing holders as linear decreases,” he said, adding that Warner Bros. Discovery Inc. (WBD) “may not extend NBA rights in their present form,” while Paramount’s CBS “may have to contemplate an early NFL departure.”
Cahall said in his first assessment that the problems in conventional media might result in “much higher profitability pressure for firms like PARA.” This is despite the corporation’s progress in streaming, with maybe 46 million Paramount+ customers and a successful plan to drive development in that segment of the business.
“Raising streaming fees would indicate that the company is more appealing/sustainable, but it would also risk churn,” he said.
Paramount stock (NASDAQ:PARA)has plummeted 35% this year, while the S&P 500 has dropped 23%.
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