Paramount Skydance (NASDAQ:PSKY) faces a long and costly turnaround as it integrates Skydance and Paramount Global. Analysts warn that execution will take years.
Despite its potential as a global media powerhouse, Paramount Skydance must overcome restructuring hurdles, heavy content spending, and streaming losses.
Bank of America Securities analyst Jessica Reif Ehrlich initiated coverage on Paramount Skydance with an Underperform rating and a price forecast of $11.
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Ehrlich argued that while the new entity has the potential to evolve into a global media powerhouse, the turnaround will take years, demand significant investment, and require investor patience.
Drawing comparisons to Warner Bros. Discovery’s (NASDAQ:WBD) prolonged integration, she emphasized that Paramount Skydance faces a similarly complex restructuring path.
Ehrlich noted that the Skydance-Paramount merger closed on August 7, 2025, following years of sale attempts and a lengthy regulatory review.
She said the uncertainty created operational challenges, as Paramount had been underfunded for years due to cost-cutting by prior leadership.
With David Ellison now CEO and fresh capital injected by Skydance and RedBird, she sees potential in Paramount Skydance’s combination of iconic studios, CBS broadcast assets, and valuable sports rights. However, she stressed that execution remains uncertain.
On synergies, Ehrlich highlighted management’s $2 billion cost savings target, which could help offset heavy content spending. She believes the target is achievable given recent industry precedents, but she warned that incremental rights costs and unprofitable streaming will weigh on near-to-medium-term earnings.
She forecast $3.06 billion calendar 2026E EBITDA, far below management’s $4.1 billion projection, citing the $750 million UFC rights deal as a significant expense partially balanced by modest Paramount+ subscriber growth and ad uplift.
Ehrlich said the stock currently trades at a premium to peers like Fox (NASDAQ:FOX), Disney (NYSE:DIS), and Warner Bros. She sees the valuation as “rich,” especially given limited financial visibility, secular headwinds in linear TV, and Paramount+’s lack of profitability.
While acknowledging CBS’s importance for sports and news, she warned that linear OIBDA continues to decline at roughly 10% CAGR.
Her skepticism extended to the DTC unit, which reported -$497 million OIBDA in 2024. She said scaling Paramount+ will require heavier content spending, bundling strategies, or a potential merger with another subscale streamer.
