Paramount Global Inc.’s stock may have surged 27% over two sessions to close out last week, but it’s still down some 40% since the start of May.
BofA Securities analyst Jessica Reif Ehrlich thinks the company should seriously consider asset sales, but given the stock’s
PARA,
-8.14%
steep declines in recent months, she’s worried that major deals don’t seem to be in the cards.
“Despite receiving credible bids for several different assets (e.g. Showtime and BET), it does not appear any significant asset sales are on the horizon,” she wrote in a Monday report. “Given the secular challenges in the traditional media ecosystem, we were surprised to see [Paramount] walk away from these potential buyers for various assets.”
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Reif Ehrlich appreciates that Paramount would want to get the maximum price for its assets, but she worries the pressure on shares could complicate matters. “Our concern is the longer it takes to execute potential asset sales, the less value they could ultimately garner,” she wrote.
That dynamic is one reason Reif Ehrlich cut her rating on Paramount shares by two notches — to underperform from buy — in Monday’s note to clients. Shares were down 4% in morning action.
Reif Ehrlich also noted a “challenging macro backdrop,” difficult secular trends for the traditional media industry, the prospect of continued negative free cash flow next year and the company’s heightened leverage.
She thinks it will be a few years before the company can see sustainable positive free cash flow, as improvements this year seem linked to Hollywood strikes.
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