Paramount Global Analysis – February 2023

Paramount Global (NASDAQ : PARA), a media company formerly known as ViacomCBS, missed earnings estimates in its most recent quarter losing nearly 6%. Is it a buying opportunity? Lets look at the company.

Paramount Global is a multi-faceted company. It has instantly recognizable cable networks, movies and shows. To name a few: Paramount Pictures, Miramax, CBS television network (sports, news, entertainment), Showtime, Nickelodeon and Simon & Schuster. The company has been trending in the news lately because of growing subscriptions (77 million in the end of 2022) to its new-ish streaming platform called Paramount+.

Q4 2022 earnings revealed that there is room to grow in terms of operating cash flow and earnings. A statement from Bob Bakish, President & CEO, Paramount: “Our content and platform strategy is working and, with even more exceptional content coming this year, we expect to return the company to earnings growth in 2024.”

Paramount is set to grow exponentially in the next few years and is currently trading under its fair value. It has a trailing P/E ratio of 5.35, a forward P/E 19.12, a Price/Book of 0.67 and a Price/Sales of 0.52. These ratios are all lower than its bigger competitors such as WarnerDiscovery, Netflix and Disney. Paramount’s dividend yield is attractive too at 4%. Being a potential acquisition target with its market cap hovering around $15 billion is not impossible (MGM studios was acquired by Amazon for $8.5 billion). Paramount Global is seeking to sell off its Simon & Schuster division in the range of $2-3 billion over the next year and could do many things with that kind of money. Disney is similar in many ways to Paramount, it owns big cable networks (Fox, ABC), has a large library of movies (Disney, Pixar, Starwars, etc). If Paramount was valued like its competitors, it would be selling at a much higher price given its arguably stronger brands. I believe that over the mid-term period of two-three years, Paramount will be priced higher than it is today and will deliver sustainable shareholder returns over said period.

*I own shares of PARA*

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