Guggenheim slashes Paramount Global’s price target on ‘more modest’ streaming subaccount and ad trends – The Hollywood Reporter
Guggenheim analyst Michael Morris still views Paramount Global as a “buy” but has also lowered its share price target, and forecasts slower revenue growth for streaming subscriber counts and the entertainment conglomerate’s ad sales.
The Hollywood studio, which caught the eye of investors after billionaire investor Warren Buffett bought Paramount Global in May, faces “a more modest pace of direct-to-consumer subscribers, expectations for advertising trends” , Morris said in a July 6 investor note that lowered second earnings expectations.
While increasing Paramount Global’s film division performance estimates on Tom Cruise Top Gun: Maverick release, the Guggenheim’s forecast for slowing growth in streaming subscriber sign-ups and ad sales is a headwind given that the studio seeks both budget and premium customers with its free-to-play Pluto TV streamer and ad-supported and its paid Paramount+ subscription video-on-demand platform.
“We have lowered our Q2 advertising outlook in the TV Media and DTC (direct-to-consumer) segments, reflecting progressive market weakness,” Morris said as Guggenheim lowered its Paramount Global price target to $35.00 vs. $40.00. Other Wall Street watchers have also pointed to advertising budgets likely to shrink as marketers seek to cut costs amid a looming recession for the national economy.
In mid-February, Guggenheim lowered the price target on then-named ViacomCBS to $40.00 from $53.00, while maintaining the buy rating after the studio rebranded as Paramount Global and reported that he was going all-in on streaming.
Morris’ latest estimate for Paramount+ subscriber growth was down to 4.1 million, from 4.5 million net additions. “Our revised DTC subscriber pace… better reflects headwinds from shutdowns in Russia (-3mm net additions) as well as a gradual decline in non-Paramount+ services,” the Guggenheim analyst said of her latest modeling for Paramount Global.
Elsewhere on Wall Street, Bank of America‘s Jessica Reif Ehrlich previously rated Paramount as “Neutral” in a June 2 report, while MoffettNathanson analysts had the company as “Neutral” with a price target of $30, as of May 2.
Shares of the studio, which will report second-quarter results on Aug. 4, were trading down 37 cents, or 1.5%, at 24.82 on Wednesday morning.