Paramount Global (PARA-Q)

The merger with Skydance is a done deal. Move on. Look at Disney instead, which is cheap now.

They're near a merger deal with Skydance. Shares are popping. Doesn't like the valuation of the merger which will be 5x more than the valuation of Paramount alone. He won't add shares, but hold on, because he sees value in Paramount Studios.

The balance sheet is awful. Shares are down 54% in the last year.

Are discussing bundling their streaming service, so shares are popping on this good news. They've had a rough year. They're cutting costs and turning things around. 2024 will be better for ads in linear TV. Free cash flow estimates are rising to $400 million. The market is seeing how things are not that dire here.

They just reported. Expectations were so low, but they delivered in-sales, a strong earnings beat, driven by Paramount+ whose revenues and subscribers have risen. The streamer has also expanded its profits. However, ad revenues and licensing (due to the actors and writers strikes) were down on the quarter and missed. But streaming's strength offset that weakness. That said, PARA has a weak balance sheet that needs interest rates to decline.

They have the balance sheet from Hades

Potential takeout target.
Broadcasting segment adds complexity to business. 
Berkshire Hathaway owns ~15% of shares (good sign).
Tough environment with competition from Netflix and Disney.

There's opportunity and runway here. Most of all, there are margins in an ad tier.

Despite today's rally on a report that Amazon will offer an ad tier on Prime, PARA's momentum is clearly broken already. Doesn't like it.

She bought this in 2020 at $16. The content alone makes this worth $15.

They need a partner with deep partners and won't thrive until then. They need cost synergies. Prefer they partner with a similar company to enjoy synergies. There is value, but need a partner to unlock it.

He disagrees. Subscriber numbers at PARA have beaten expectations for the last 6 quarters. They could be profitable by mid-2024. This isn't a start-up, but are growing it rapidly, outpacing their peers in pace.