Paramount Skydance’s Turnaround Will ‘Take a Significant Amount of Time,’ Analyst Says

Paramount Stock has dropped 85% from its all-time high of $100.34 on March 22, 2021. (Kyle Grillot/Bloomberg)

Paramount Skydance’s turnaround “will take time,” says a BofA Securities analyst, who initiated coverage of the stock with an underperform rating on Friday.

Jessica Reif Ehrlich started coverage of Paramount Skydance on Friday with an $11 price target, which implies a 25% decrease from the stock’s closing price of $14.74 on Thursday.

“We believe PSKY has the potential to be a dynamic global media company. However, there are no easy fixes and a turnaround such as this will take a significant amount of time, require substantial investment and investor patience,” Ehrlich wrote in a research note.

Barron’s has reached out to Paramount for comment. The stock was rising 2.2% to $15.06 on Friday.

Before the merger between Paramount and Skydance, Wall Street was focused on problems at Paramount, including competition with streamers like Netflix and Disney +, a declining linear TV landscape, and some disappointing film releases. Paramount’s debt was also a concern. S&P Global cut its credit rating on Paramount to BB-plus from BBB-minus, or junk territory, in March 2024.

“Paramount was starved of capital investment for years, as prior leadership focused on cost cuts and shorter-term performance,” Ehrlich wrote.

On top of helping to pay some of Paramount’s debt, the merger was meant to help Paramount “forge a new path forward in the entertainment industry, combining its extensive creative library and global distribution network with Skydance’s production expertise and industry-leading technological capabilities,” the companies have said.

Ehrlich believes that with the right management and capital structure, Paramount Skydance has the potential to be a “global media powerhouse driven by technology, creative and content leadership.” But that isn’t going to happen overnight.

Some analysts are more optimistic.

Last week, CFRA analyst Kenneth Leon raised his price target on Paramount to $19 from $6 while maintaining a Hold rating on the stock.

“We believe the new management team, with David Ellison as Chairman and CEO and Jeff Shell as President, will drive innovative thinking and best practices to modernize the company,” Leon wrote.

Shares of Paramount Skydance have fallen 85% from their all-time high of $100.34 on March 22, 2021. However, the stock has gained 40% this year.

Write to Angela Palumbo at angela.palumbo@dowjones.com