Paramount cut to Neutral at Citi

Investing.com -- Citi cut its rating for Paramount Global from Buy to Neutral and lowered its price target from $13 to $12, citing a more balanced risk-reward profile for the stock at current levels. The revised target still reflects a valuation of 6.4x 2026 EV/EBITDA.

While analysts continue to expect the Skydance Media transaction to close in 2025, Citi cautioned that “the equity’s risk-reward is relatively balanced at prevailing levels.”

The firm also anticipates heightened volatility ahead due to the transaction’s structure, noting that “given the large cash payment election (~$7 per share), we expect a period of elevated volatility in the equity related to the positioning of event-driven funds post close.”

Looking beyond the merger, Citi believes the most compelling developments for Paramount could come from a strategic pivot under new management.

Among the possible moves, analysts suggested Paramount might sell its “linear cable assets to the new entity (Versant) that will spin-out of Comcast (NASDAQ: CMCSA) later this year,” divest “some broadcasting assets if we see ownership restrictions relaxed,” and potentially “sell Paramount+ in exchange for a stake in a larger DTC business.”

Citi noted that the video streaming market may benefit from consolidation, stating, “We believe the market needs fewer video apps (with greater scale) to more effectively compete with Netflix (NASDAQ: NFLX).”

Still, Citi emphasized that it is too soon to incorporate these potential asset sales into its valuation.

“We think it’s too early to incorporate these potential sales into our valuation calculus since the Skydance transaction has not closed,” concluded the bank.

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