Paramount Shares Drop 5.7% Amid Analyst Downgrades

NEW YORK, NY — Shares of Paramount Global fell 5.7% during Monday’s morning trading session after analysts from Morgan Stanley and Guggenheim expressed a cautious outlook on the company’s stock. Morgan Stanley reduced its price target from $12 to $10 while maintaining its ‘Underweight’ rating. They noted that Paramount’s shares are valued higher than its peers, which they see as problematic given forecasts for stagnant adjusted operating income growth through 2028.

Guggenheim also downgraded Paramount Skydance from ‘Buy’ to ‘Neutral’, signaling increasing concern about the company’s future performance and valuation. Analysts often note that the stock market can overreact to news, but drastic price drops could present buying opportunities for quality stocks.

Paramount’s shares have historically been stable, with only eight movements greater than 5% over the last year. Today’s decline is relatively significant, although it may not fundamentally alter perceptions of the business. The previous notable dip occurred a day before when the stock dropped 4.1% following reports of significant layoffs expected after the company’s merger with Skydance Media, which has prompted layoffs of 2,000 to 3,000 positions to save costs.

Paramount President Jeff Shell characterized these layoffs as a necessary one-time event to stabilize operations in the future, emphasizing that the company does not wish to engage in ongoing layoffs. Paramount’s performance has struggled, with a 2% revenue decline annually over the past two years and a decrease in earnings per share.

Despite the recent challenges, stocks are still up 40.9% year-to-date, trading at $14.91, close to its 52-week high of $16.03 set in August 2025. However, investors who bought $1,000 worth of shares five years ago would now see their investment value drop to approximately $527.41.

The merger with Skydance, a media production company known for hits such as ‘Top Gun: Maverick’, aims to reinvent Paramount by combining its vast content library with Skydance’s technological innovations. Plans include using artificial intelligence for efficient content creation and exploring new content avenues like the recent acquisition of rights for Ultimate Fighting Championship (UFC) events for seven years at a hefty price of $1.1 billion annually.

Despite concerns over hefty expenses and potential profitability of these rights, the strategy could enhance Paramount+’s attractiveness to new subscribers. The stock saw a brief surge of nearly 36% on August 13 amidst market speculation, but has since stabilised around $13.50 by August 18, indicating potential downside compared to the analysts’ projections.

As it stands, Paramount generated $507 million in free cash flow over the past year, with an enterprise value of around $24.5 billion, translating to a steep EV/FCF ratio compared to industry peers. Analysts remain cautious as Paramount prepares to reveal its third-quarter earnings in late October or early November, making this an important time for investors to reassess their positions on the stock.