Paramount Leads S&P 500 After Earnings. Wall Street Wants to See What’s Next.

Paramount stock jumped almost 10% after the company’s earnings report. (Mario Tama/Getty Images)

Key Points

• Paramount Skydance stock surged 9.8% to $16.75, making it the S&P 500’s top performer on Tuesday afternoon.
• The company reported 79.1 million subscribers in the third quarter and projected higher-than-expected revenue for the fourth quarter and 2026.
• New CEO David Ellison outlined plans to focus on direct-to-consumer growth, invest in exclusive content, and release at least 15 films annually starting in 2026.

Wall Street analysts are looking at what’s next for Paramount Skydance as the stock rises in response to solid financial forecasts and streaming numbers.

After the stock market closed on Monday, the entertainment company issued forecasts for fourth-quarter and 2026 revenue that came in higher than Wall Street had expected, partly because it is raising prices for its Paramount+ streaming service. Subscribers came in at 79.1 million in the third quarter, compared with the 78.5 million analysts expected.

It was the first earnings report since Paramount merged with Skydance in August. New CEO David Ellison marked the occasion with a letter to shareholders outlining plans for the company. Priorities include focusing on direct-to-consumer growth through Paramount+, investing heavily in exclusive content such as live sports, and building up its portfolio of movies by releasing at least 15 films a year starting in 2026.

Some of the money will come from cost cuts: Ellison also said the company plans to reduce expenses more than previously expected and reinvest some of the savings in the business.

Benchmark analyst Daniel Kurnos wrote in a research note Tuesday that while there was a lot to consider in Ellison’s first public appearance as CEO, “the tone was clear—Paramount Skydance has no intention of saving their way to prosperity, although they believe they can drive substantial margin improvement along the way, all leading to enhanced shareholder value.”

Kurnos raised his price target for Paramount stock to $19 from $16, continuing to rate the shares at Buy.

Paramount stock was up 9.8% to $16.75, making it the best performer in the S&P 500 as of Tuesday afternoon. The index was down 0.3%.

Analysts seem to agree that now comes the hard part for Paramount.

“All said, it is clear PSKY has a very strong management team and there will be upward estimate revisions post results. However, there are still many unknowns on the strategic initiatives the company has undertaken and, as evidenced by prior large combinations, restructurings often take years to implement,” BofA Securities analyst Jessica Reif Ehrlich wrote on Tuesday. She also raised her price target to $13 from $11, but maintained an Underperform rating on the stock.

Still unclear are Paramount’s plans when it comes mergers and acquisitions. Media reports have said it is trying to buy Warner Bros. Discovery , and that Warner Bros. has rejected several bids from Paramount. Management declined to comment on a call to discuss the results.

Needham analyst Laura Martin says investors should watch out. “Given recent press reports about PSKY’s potential bid for WBD, a company much larger than itself (implying dilution), we recommend investors remain on the sidelines until PSKY’s asset base, leadership structure, strategic vision and execution road map are clarified,” she said in a research note. She rates the stock as a Hold without a price target.

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