Paramount jumps 15% as dueling Street camps weigh earnings beat (NASDAQ:PARA)

Paramount Global stock on Friday pulled its best gain since the company’s early-2022 renaming — (NASDAQ:PARA) +15%, (NASDAQ:PARAA) +15% — following a third-quarter report where the company beat Wall Street expectations thanks to positives in its streaming business.

But analysts remain divided about what the trajectory for the media giant looks like from here.

Among the company’s bulls is Citi, which noted that while revenue was mostly in line, adjusted operating income and earnings per share were “notably” higher than expected. Direct-to-consumer results, driven by Paramount+, were also significantly better than consensus, with losses some $200M narrower than the Street forecast, analyst Jason Bazinet noted. The bank has a $20 target price, implying another 46% upside for a stock that’s already gained 28% this week.

Guggenheim sees similar upside ($19 target), using a multiple of 6x EV/EBITDA similar to peers since Paramount is a “similar, high-quality company tackling the same challenge of navigating the consumer shift away from linear bundles toward streaming platforms,” analyst Michael Morris said.

Needham also maintains a Buy on Paramount due to a diversified business model that’s “best in class (our view) because: (a) it includes AVOD (ie, PlutoTV) plus SVOD (Paramount+ plus Showtime); and (b) adding more data to its linear pay-TV ad units (through addressability) suggests CPM upside through data-driven ad buying by brand advertisers.”

Perhaps the biggest bears on the Street are Morgan Stanley and analyst Benjamin Swinburne, who maintained an Underweight rating and Street-low price target of $9 (now marking 34% downside).

“We continue to see PARA’s exposure to the declining linear TV business combined with elevated leverage and a premium multiple as skewing risk to the downside,” Swinburne said. The focus on improving leverage and profitability is positive, but ad pressure that continued in Q3 is expected to linger into Q4, and “licensing revenues will be pressured at both TV and Film, due to the labor strikes in TV and tough compares at Film.”

Bernstein also is sticking with an Underperform rating, agreeing that it likes the narrative in streaming and earnings growth, but “there are some nuances that keep us on the sidelines for now,” analyst Laurent Yoon said: “Engagement is the single most important metric in Video. Period. Higher engagement leads to lower churn, more subs, and more pricing power. Coming into this print, Paramount+’s aggregate CTV engagement share in the US did not improve vs. the prior quarter, suggesting lower engagement and higher churn vs. its competitors.”