Paramount Global stock (NASDAQ: PARA) has been on a downward trend, dropping nearly 30% since January. This is in stark contrast to media giant Disney, which has seen a 10% increase over the same period. The recent decline in PARA stock came after National Amusements called off merger discussions with Skydance Media due to disagreements over terms. Despite interest from other parties such as Sony and Apollo Global Management, the favored company, Skydance, failed to reach a deal with controlling shareholder Shari Redstone. Paramount’s investments in its streaming business have also impacted profits in recent years, further contributing to the decline in stock price.
Looking at a longer timeframe, PARA stock has suffered a significant decline, falling from $35 in early 2021 to around $10 currently, representing a 70% drop. Returns for PARA stock were negative in 2021, 2022, and 2023, underperforming the S&P 500 index. The Trefis High Quality Portfolio, comprised of 30 stocks, has consistently outperformed the benchmark index, highlighting the challenge for individual stocks to beat the market. Despite the difficult macro environment with weak consumer sentiment and rising interest rates, there is hope for a potential recovery for PARA stock.
Paramount recently reported better-than-expected Q1 2024 results, with revenue growing by 5.8% year-over-year and earnings showing a significant increase. The company has been focused on cost-cutting initiatives, with a decline in selling, general, and administrative expenses. Paramount’s streaming business, particularly Paramount+, has shown promising growth with a subscriber base of 71 million and a revenue increase of 51% year-over-year. The company’s efforts to raise subscription revenues through streaming services have been successful, indicating a positive trajectory for future earnings growth.
Despite recent setbacks in merger discussions, Paramount’s assets remain valuable, including its renowned studio business with a vast library of content and successful franchises like Star Trek and Transformers. Potential investors, including producer Steven Paul and a media executive backed by Bain Capital, have shown interest in Paramount. The company may also consider individual asset sales, such as BET and local TV stations, in addition to its CBS operations. With Paramount stock trading at a low multiple of projected 2024 earnings, the stock is considered attractive from an investment perspective.
In conclusion, while Paramount Global stock has faced challenges in recent years, there are signs of improvement with positive Q1 2024 results and growth in its streaming business. Despite the recent decline in stock price, there is optimism for a potential recovery in the future. With valuable assets, strong franchises, and cost-savings initiatives in place, Paramount has the potential for earnings growth in the coming years. Investors may see an opportunity in PARA stock, which is currently undervalued compared to its peers in the streaming industry.
