Global Paramount Shares Downgraded Due to ‘Increased Downside Risk’

“Are we there yet? Anyone who has a young child knows how this question can be heard over and over again by even the quietest driver on the road.

Friday’s report by MoffettNathanson analyst Michael Nathanson began as a description of a typical family summer vacation, only to turn to recession concerns among investors in the media and entertainment industries.

“We think media investors feel something similar when trying to figure out the timing and shape of a possible economic downturn,” he continued. “To be clear, these concerns are not an illusion. Instead, this anxiety is fueled by the amount of advertising data, especially from digital companies. Of course, media actions are already signaling cloudy skies as they run out, as it becomes more apparent that the advertising slowdown is real. “

So far, “TV advertising is not taking off as quickly as digital advertising, both because of the high quality of ad volume resulting from past engagements and the need for advertisers of larger brands to continue to reach large audiences through digital advertising. sports and other live streams. Nathanson. is emphasized.

However, if history is any guide, things are more complicated. “Looking at past recessions, traditional media advertising formats such as television and print media, which focus on brand advertising, are conspicuously absent from online advertising,” noted MoffettNathanson. “We believe that this time should be no different.”

The first bearish in terms of the stock outlook, according to the Nathanson report, is Paramount Global, led by CEO Bob Buckish. “As a result of our performance, we are downgrading Paramount to ‘low performance’ (from ‘market performance’), lowering our industry revenue estimates due to initial weakness in advertising, and updating our price targets to reflect our revised approach to the total net usage. ” A business valuation approach.

Why did you choose Paramount Pictures, Paramount+, Pluto TV, CBS, MTV, Nickelodeon and BET? “Despite continued momentum from Paramount+, we are downgrading Paramount as the increasing risk of lower advertising puts additional pressure on the company’s ability to increase earnings before interest, taxes, depreciation and amortization (EBITDA) and growth. free cash flow (FCF) to match previous levels. “” Nathanson explained.

Based on its reduced financial forecast, which includes a 6.0% cut in 2022 EBITDA estimates to $3.61 billion and a 7.1% cut in 2023 EBITDA estimates to $3.16 billion, also lowered the company’s share price target from $12 to $18.

Tom Cruise’s stellar performance won’t help Paramount, writes Nathanson. “Despite the strength Top Gun: Maverick Moving into the second quarter, we are reducing our full-year EBITDA estimates… to reflect a more challenging advertising environment,” he explained.