By Nate Wolf
Paramount Skydance fended off Netflix in the battle to acquire Warner Bros. Discovery, but now comes the hard part: Integrating a huge new company. That will take time, says BofA Securities.
The firm reiterated an Underperform rating on Paramount stock and slashed its price target to $11 from $13 in a research note Monday. The merger adds to the company's long-term potential, but the pathway to realizing that potential is long and uncertain, BofA argued.
Investors seem to agree. Paramount stock was down 7.4% to $10.37 on Tuesday, putting it on pace to fall for a sixth time in the past seven sessions. The shares have now given back their entire 21% gain from Feb. 27, the day Paramount announced its deal to buy Warner Bros.
Paramount declined to comment.
Warner Bros. will join a company in transition. Paramount and Skydance Media only merged last summer, bringing the combined company under the leadership of CEO David Ellison, the son of Oracle co-founder Larry Ellison. Paramount was a Barron's stock pick after that deal.
"PSKY had already been undergoing an integration process from the Paramount Skydance merger (which had only just begun) and now would be adding an even larger entity to the mix," wrote BofA analyst Jessica Reif Ehrlich.
The conglomerate would indeed be enormous. Paramount Pictures and Warner Bros. together control 30% of the U.S. box office, BofA estimates, including titles like Star Trek, Harry Potter, and DC Comics. And while linear television is shrinking, the combination of networks such as CBS, TNT, and CNN could slow that decline and add to the company's video inventory.
But integrating properties isn't easy. Paramount has plans to boost streaming content and release 30 films a year -- 15 from each studio. That kind of output "is a significant undertaking and outcomes are uncertain," Reif Ehrlich wrote.
Juggling rapid growth and investors' thirst for profit isn't easy, either. Ellison appears willing to pay top dollar to beef up Paramount's offerings. The company has already secured the rights to "South Park" and TKO Group's Ultimate Fighting Championship events, for instance.
"Indications are PSKY paid well above the next best offer for both of these deals," Reif Ehrlich said. "We believe management will continue this aggressive posture as it relates to content investment."
The next bidding war is coming soon. Ellison wants Paramount to continue hosting games as part of the National Football League's next media deal. Paramount could lose some or all of its NFL package due to pricing -- or it could absorb yet another steep cost increase, BofA said. The company is factoring negotiations with the league into its internal forecasts, it said last month.
With the Ellisons' backing, Paramount has plenty of financial firepower. But reaching normalcy after so much upheaval and growth is a years-long project. Paramount will operate at a net debt--to--Ebitda ratio of 4.3 when the Warner Bros. deal closes, the company projects after factoring in cost synergies. It says it can get that ratio to an investment-grade level of 3-to-1 within three years.
"We believe PSKY, particularly with the addition of WBD, has the potential to be a dynamic global media company," Reif Ehrlich wrote. "However, mergers and restructurings at this scale take significant time and require investor patience."
Write to Nate Wolf at nate.wolf@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
March 10, 2026 14:45 ET (18:45 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
Comments