Streaming giants are navigating a rapidly evolving media landscape as consumers increasingly shift from traditional TV to digital platforms. Paramount Global (NASDAQ:PARA) is at the forefront of this transition, leveraging its robust content library to enhance its direct-to-consumer offerings and drive revenue growth.
Guggenheim analyst Michael Morris maintained a Buy rating for Paramount and a price target of $14 on Thursday.
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Paramount Global reported quarterly earnings of $0.46 per share, which beat the analyst consensus estimate of $0.35 by 29%. The company reported quarterly sales of $6.849 billion (up by 1% year-over-year), which beat the analyst consensus estimate of $6.841 billion.
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Morris said the rerating reflects Paramount’s outperformance in the direct-to-consumer (DTC) segment. DTC revenue rose to $2.2 billion, up 14.9% Y/Y, and adjusted OIBDA reached $157 million, above his and Street estimates. The acceleration in DTC revenue was driven by growth in Paramount+ subscribers and recent price increases, despite a quarter-over-quarter decline in subscribers linked to the expiration of an international distribution deal.
Paramount+ saw record-low churn and a third straight quarter of rising watch time per user, up 11% year-over-year. However, DTC advertising revenue fell 4%, as increased digital ad supply pressured pricing. Traditional TV advertising also declined, with rising rates offset by a decline in viewership.
Morris highlighted strength in upfront ad sales, with volumes in line with those of last year and sports bookings up by double digits. Still, he noted ongoing pressure from linear TV declines and weak performance in Filmed Entertainment. Paramount did not issue updated financial guidance due to the pending Skydance transaction, which is expected to close on Aug. 7.
His $14 price forecast assumes a 6.8 times OIBDA multiple, consistent with that of his peers, reflecting Paramount’s strong content portfolio and ongoing pivot from linear TV to streaming.
Morris projected third-quarter revenue of $6.77 billion and EPS of $0.43.
PARA Price Action: Paramount shares were up 4.06% at $13.08 at the time of publication on Friday, according to Benzinga Pro data.
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