On Monday (NASDAQ:MNDY), MoffettNathanson updated its outlook on Paramount Global (NASDAQ: PARA), increasing the price target from $9.00 to $10.00 while keeping a Neutral rating on the stock. The firm's analysis led to adjustments in revenue and earnings forecasts for the media conglomerate, following a closer examination of the company's various business segments.
The firm's analyst has left the total revenue forecast for the full year 2024 at $29.0 billion. This decision comes after an increase in the TV Media outlook balanced out reductions in the Direct-to-Consumer (DTC) and Filmed Entertainment sectors. Despite these cuts, the third quarter's EBITDA (earnings before interest, taxes, depreciation, and amortization) outperformance and a more optimistic fourth-quarter TV Media outlook have prompted the firm to raise its full-year EBITDA projection by $300 million to $2.8 billion.
In addition to the EBITDA adjustment, MoffettNathanson has increased its earnings per share (EPS) forecast for Paramount Global by $0.35 to $1.60. This change reflects the positive financial results anticipated from the company's TV Media division.
Looking ahead to 2025, the firm has made only slight revisions to its forecast, now predicting a breakeven EBITDA for Paramount's DTC segment. This adjustment contributes to an overall company EBITDA estimate of $3.0 billion, which is an increase of $200 million from the previous forecast. Correspondingly, the EPS estimate for 2025 has been raised by $0.26 to $1.35.
The revised price target of $10.00 reflects these updated estimates and takes into account a preliminary pro-forma valuation approach that includes the potential impact of the proposed Skydance deal. Despite the upward revision in financial forecasts, MoffettNathanson maintains its Neutral stance on Paramount Global shares.
In other recent news, Paramount Global reported a robust performance in Q3, with a significant uptick in direct-to-consumer (D2C) profitability. This growth was fueled by the addition of 3.5 million subscribers to the company's Paramount+ platform, resulting in a 25% year-over-year revenue increase. The company's Adjusted Operating Income Before Depreciation and Amortization (OIBDA) also improved, reaching $858 million in Q3, marking a 20% increase from the previous year.
Paramount Global anticipates achieving domestic profitability in Paramount+ by 2025, with cost reductions expected to yield $500 million in annual savings. In terms of content performance, Paramount's "A Quiet Place: Day One" and "Transformers One" grossed $261 million and $127 million respectively. Looking ahead, the company expects a strong Q4 with releases like "Gladiator II" and "Sonic the Hedgehog 3." Paramount Global also projects continued strong performance into 2024, with a focus on subscriber growth and profitability improvements.
InvestingPro Insights
To complement MoffettNathanson's analysis, recent data from InvestingPro offers additional context on Paramount Global's financial position. The company's Price to Book ratio stands at a low 0.47, suggesting the stock may be undervalued relative to its assets. This aligns with the firm's cautious but improved outlook.
InvestingPro Tips highlight that Paramount has maintained dividend payments for 19 consecutive years, demonstrating a commitment to shareholder returns despite recent challenges. Additionally, analysts predict the company will be profitable this year, which corresponds with MoffettNathanson's increased EPS forecasts for 2024 and 2025.
It's worth noting that InvestingPro offers 7 additional tips for Paramount Global, providing investors with a more comprehensive analysis of the company's prospects. These insights could be particularly valuable given the evolving media landscape and Paramount's strategic positioning.
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