Entertainment giant Paramount Skydance (PSKY) did not have what anyone would call great credit, even before the plan to buy fellow entertainment giant Warner Bros. Discovery (WDB). And that deal has S&P Global reconsidering Paramount’s credit in the worst possible way. Investors seemed unconcerned, and gave Paramount shares a modest boost in the closing minutes of Thursday’s trading.
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Paramount’s credit rating was already below junk-status, reports noted, and that rating is about to get worse. Currently, Paramount credit is rated a BB+, which makes Paramount bonds effectively “speculative-grade.” And S&P Global will lower the rating one step further to BB, once the acquisition closes. Given that Paramount looks to close this deal before July ends, at last report, that shift will come sooner than most expect.
The reason is simple enough; Paramount’s acquisition of Warner will come with “major ongoing uncertainties,” reports note. Paramount already had substantial debt on its hands, and gathered up more to lay hands on Warner. Plus, Paramount will get Warner’s debt, which stands at around $30 billion by itself. A combined Paramount-Warner means a whole lot of debt on the books, debt that Paramount will need to pay back at some point. S&P Global does not look for Paramount’s debt to improve much before 2028.
The “Image Problem”
Paramount has another problem on its hands, specifically, CEO David Ellison’s image in Hollywood right now. Reports suggest he is currently facing a “revolt” right now as consolidation threatens jobs and raises the potential for backlash. Ellison’s connections to the Trump administration are not doing him favors either, particularly in liberal California.
Even the merger is drawing concern. While some believe this is a great way to get HBO Max / Paramount+ into a better position to compete with Netflix (NFLX) and other larger streamers, others point out that the studios were supposed to supply the streamers with content, not replace them as streaming platforms. Either way, Ellison is right at the center of it all, and may have some larger issues going forward to address.
Is Paramount Stock a Good Buy Right Now?
Turning to Wall Street, analysts have a Moderate Sell consensus rating on PSKY stock based on one Buy, five Holds and four Sells assigned in the past three months, as indicated by the graphic below. After a 14.59% loss in its share price over the past year, the average PSKY price target of $11.38 per share implies 10.87% upside potential.
