Streaming Scale And Sports Expansion Will Drive A Powerful Media Turnaround

Catalysts

About Paramount Global

Paramount Global is a diversified media and entertainment company that produces, distributes, and monetizes premium content across film, television, streaming, news, sports, and interactive platforms worldwide.

What are the underlying business or industry changes driving this perspective?

• Rapid scaling of Paramount plus, supported by unified technology across Paramount plus, Pluto, and BET plus and stronger recommendation and ad tech, is expected to convert global audience reach into higher subscription revenue and digital advertising growth.
• Material expansion of theatrical output to at least 15 films per year, combined with marquee talent partnerships and a deep content library, should increase high margin franchise monetization across box office, licensing, and streaming earnings.
• Transforming CBS and key cable brands into engines for both linear and streaming, with sports, news, and core genres like kids and family, comedy, and music, is poised to stabilize legacy revenue while lifting engagement and net margins in the D2C segment.
• Year-round premium sports, led by exclusive UFC rights and Zuffa Boxing, is set to reduce churn, attract younger demographics, and support pricing power, driving higher ARPU, more resilient subscription revenue, and improved segment profitability.
• Company-wide technology initiatives, including Oracle Fusion deployment, AI enhanced operations, and a $3 billion plus efficiency program, are expected to structurally lower the cost base, accelerating free cash flow growth and expanding consolidated operating margins.

Assumptions

This narrative explores a more optimistic perspective on Paramount Global compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts. How have these above catalysts been quantified?

• The bullish analysts are assuming Paramount Global's revenue will grow by 2.4% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from -0.1% today to 5.5% in 3 years time.
• The bullish analysts expect earnings to reach $1.7 billion (and earnings per share of $2.49) by about December 2028, up from $-19.0 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $944.3 million.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 9.5x on those 2028 earnings, up from -391.8x today. This future PE is lower than the current PE for the US Media industry at 16.0x.
• The bullish analysts expect the number of shares outstanding to grow by 1.13% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 10.01%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• The long-term shift from traditional linear TV and accelerating cord cutting, particularly on the cable side where declines are described as continuing and accelerating each quarter, may outpace Paramount's ability to migrate audiences and advertisers to streaming. This would pressure advertising revenue and limit overall top line growth.
• The strategy to grow theatrical output from roughly 8 to at least 15 movies a year starting in 2026 and to add more than $1.5 billion of incremental programming spend across film and direct to consumer increases fixed content costs in a hit driven and cyclical box office market. Underperforming slates or franchise fatigue could erode content returns and compress net margins.
• Heavy reliance on direct to consumer scale, including year round UFC and sports programming, assumes subscribers will accept higher pricing and lower churn. However, intensifying global competition from larger tech enabled streamers and potential sports rights inflation could cap ARPU, raise acquisition costs and delay the path to sustainably higher segment earnings.
• The plan to unlock at least $3 billion of run rate efficiencies, integrate Oracle Fusion enterprise wide and converge three separate streaming tech stacks into one platform is operationally complex. Execution missteps or delays could dilute expected cost savings, generate integration expenses above the $800 million transformation costs already signaled and weigh on free cash flow.
• The push to become the most technologically capable media company, including greater use of AI, large scale data infrastructure and global IP optimization, requires sustained capital and talent investment at a time when management is also targeting investment grade leverage and divesting noncore assets. Any misalignment between investment needs and balance sheet constraints could slow innovation, limit competitive differentiation and restrict long term profitability.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bullish price target for Paramount Global is $17.43, which represents up to two standard deviations above the consensus price target of $12.09. This valuation is based on what can be assumed as the expectations of Paramount Global's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $20.0, and the most bearish reporting a price target of just $8.5.
  
• In order for you to agree with the more bullish analyst cohort, you'd need to believe that by 2028, revenues will be $30.9 billion, earnings will come to $1.7 billion, and it would be trading on a PE ratio of 9.5x, assuming you use a discount rate of 10.0%.
  
• Given the current share price of $11.04, the analyst price target of $17.43 is 36.6% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.