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primordial (NASDAQ:TO) (PARAA) is likely to experience continued headwinds, leading Bank of America to reiterate an underperform rating on the stock.
“We anticipate Paramount's (fourth quarter) results will reflect a continuation of choppy trends in the advertising market,” analysts led by Jessica Reif. Ehrlich wrote in a note.
The bank projected fourth-quarter revenue to decline 7% year over year to $7.6 billion with weaker box office and lingering effects from the writers' and actors' strikes, which were resolved in September and November, respectively.
“Despite initial hopes in early 2023 for a (second-half) recovery in advertising, this does not appear to materialize and visibility remains limited if it recovers in 2024,” the bank said.
The entertainment company is expected to report earnings on February 15. Analysts expect the company to break even in terms of earnings per share for the quarter ended December 31, with sales forecast at $7.9 billion.
That said, the upcoming Super Bowl and political advertising in an election year will help advertising revenue.
“There is no doubt that the broader advertising market continues to face challenges, impacted by inflation, economic uncertainty and weaker demand for some categories,” CEO Bob Bakish said on the earnings conference call in November. “And while the industry is not seeing the recovery in the second half that we expected at the beginning of the year, there are a number of positive catalysts ahead that give us confidence as we continue to navigate the headwinds.”
For the quarter ended September 30, Paramount reported revenue of $7.13 billion and earnings of $0.30 per share, both of which beat estimates.
On sale?
Bank of America said the entertainment giant has an attractive collection of assets that could generate a lot of value in a potential sale. However, there is no clarity on what this could look like and how it could benefit or harm investors, analysts said.
Paramount majority shareholder Shari Redstone has reportedly held talks about selling the company's film studio and other assets to Skydance, whose owners include RedBird Capital and David Ellison, the son of billionaire Larry Ellison.
Skydance, which produced the Paramount release Top Gun: Maverickhas become a leading candidate to take over Redstone's National Amusements, which has a majority stake in Paramount.
Bloomberg also reported earlier this year that Paramount is in talks to sell Black Entertainment Television to a management-led investment group for about $2 billion.
Warner Bros. Discovery (WBD) is among the potential buyers of Paramount or its assets.
Investment firm Moffett Nathanson recently renewed the company amid speculation about a merger.
