Paramount stock tumbles after Arete downgrade on debt concerns

Investing.com -- Paramount Skydance shares fell 8% Thursday after Arete Research downgraded the media company to sell from neutral and slashed its price target to $2, a Street low, citing concerns about the debt burden from its planned merger with Warner Bros. Discovery.

The downgrade follows Paramount’s proposed acquisition of Warner Bros. Discovery, which is set to close in September 2026. The deal would create a company with $86 billion in gross debt and leverage of six times, according to Arete analyst Pierre-Marie d’Ornano.

"Media mega-mergers are tough," d’Ornano commented, adding that it is unclear management has the "experience to run a highly levered balance sheet, which typically requires a different mindset."

The analyst pointed to a challenging track record for large media mergers, noting that estimates are frequently missed because of "ongoing linear declines, lofty streaming expectations and hard to manage capital structures."

D’Ornano said Paramount’s acquisition of Warner Bros. Discovery would likely face similar challenges, but with more expensive debt and restrictive maintenance covenants "than was the case for its WBD predecessor."

Arete reduced its price target on Paramount to $2 from a previous level, compared to the stock’s close of $9.75 on Wednesday.

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