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On Friday, UBS analyst John Hodulik maintained a Sell rating on Paramount Global (NASDAQ:PARA) with a steady price target of $11.00. Currently trading at $11.63, the stock sits between analyst targets ranging from $9 to $20. According to InvestingPro data, 10 analysts have recently revised their earnings expectations downward for the upcoming period, with the next earnings report due on April 30, 2025. Hodulik anticipates that the company’s first-quarter results will likely show increased declines in TV affiliate numbers and consistent trends in core advertising. He also expects the quarter to face challenging EBITDA comparisons due to the previous year’s Super Bowl revenue. InvestingPro analysis indicates the company’s financial health score is currently rated as ’FAIR’, with particularly strong metrics in relative value and price momentum.
The updated UBS model predicts a year-over-year revenue decline of 8.5%, a slight improvement from the previously estimated 9.0% decline. However, EBITDA is expected to fall by approximately 34% to around $654 million, which is a revision from the prior UBS estimate of $585 million and closer to the consensus estimate of $668 million. TV EBITDA is projected to decrease by 36%, or 17% excluding the impact of the Super Bowl. Based on InvestingPro’s Fair Value analysis, Paramount Global currently appears undervalued, suggesting potential upside for long-term investors despite near-term challenges.
Hodulik notes that direct-to-consumer (DTC) EBITDA is showing signs of improvement, with a forecasted loss of $133 million compared to a $286 million loss a year ago. Free cash flow (FCF) for the quarter is expected to be $69 million, a significant drop from the $209 million reported in the previous year.
Paramount Global management has indicated that they expect a stronger second half of the year for EBITDA growth, despite a slight overall decline for the full year. The company’s last twelve months EBITDA stands at $2.9 billion, with a free cash flow of $489 million, demonstrating its ability to generate cash despite challenging market conditions. Get deeper insights into Paramount’s financial health and growth prospects with InvestingPro’s comprehensive research report, part of the coverage of 1,400+ US stocks. This is attributed to the lapping effects of the Super Bowl and political advertising, as well as the net impact of core TV declines against improving DTC losses. UBS’s long-term forecast remains unchanged, with an EBITDA prediction of approximately $2.9 billion in 2025, marking a 6% year-over-year decrease, while FCF is expected to increase to about $625 million from roughly $490 million in 2024, thanks to improved working capital.
In other recent news, Paramount Global reported its fourth-quarter 2024 earnings, which fell short of analyst expectations. The company posted earnings per share (EPS) of $0.11, missing the forecasted $0.20, and reported revenue of $7.98 billion, below the expected $8.11 billion. Despite these setbacks, Paramount+ added 5.6 million subscribers, bringing its total to 77.5 million, and generated $489 million in free cash flow. Benchmark analysts maintained a Buy rating for Paramount Global, with a price target of $19.00, highlighting the potential impact of an upcoming deal with Skydance. This deal, expected to close by summer, could enhance the company’s valuation and financial stability. Analysts also mentioned the possibility of selling non-core assets as a strategy to improve financial health. Paramount’s direct-to-consumer segment showed improvement, but challenges in the core TV Media segment persisted, affecting overall performance. Investors are closely watching the Skydance transaction, which is seen as a significant event that could influence the company’s future trajectory.
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