Paramount Skydance Stock (PSKY) Soars as Morgan Stanley Double Upgrades to “Buy”

Paramount Skydance (PSKY) stock jumped about 9% on Friday, as of writing, after Morgan Stanley double-upgraded its rating on the media company to Buy from Sell. Analyst Sean Diffley raised his price target for PSKY stock to $14 from $11. Diffley believes the negative sentiment around Paramount stock presents a buying opportunity, as he views the Warner Bros. Discovery (WBD) acquisition as “transformative.” The analyst also discussed other catalysts. Let’s delve deeper into his bullish thesis.

Morgan Stanley Turns Bullish on PSKY Stock

Calling the upgrade Morgan Stanley’s “riskiest and most out-of-consensus call,” Diffley explained that the bullish stance on Paramount Skydance is based on the potential WBD deal.

He believes that the acquisition, which is a “big, bold, and game-changing move,” if completed, would give the combined company control over a strong portfolio of global IP (intellectual property), including Game of Thrones, The Lord of the Rings, and Harry Potter, coupled with a technology-focused approach.

Furthermore, the analyst highlighted three underappreciated drivers:

• AI is expected to drive notable cost savings, boost revenue across advertising, and revitalize IP.
• Confidence in achieving synergies of over $6 billion, given significant redundancies, along with strong cash flow generation to reduce leverage.
• A shift in mix toward faster-growing streaming and studio assets, while reducing reliance on linear TV to below 50% of EBITDA (earnings before interest, taxes, depreciation, and amortization) in 2028 and to nearly 30% by 2030.

Is PSKY a Good Stock to Buy?

Given concerns about high post-merger debt levels and a decline in its legacy TV business, Wall Street has a Moderate Sell consensus rating on Paramount Skydance based on five Holds, four Sells, and one Buy. The average PSKY stock price target of $11.75 indicates 5.3% upside potential.