Paramount Earnings: Encouraging Streaming Results, but Disappointment Everywhere Else

Key Morningstar Metrics for Paramount Global

• Fair Value Estimate: $20.00
• Morningstar Rating: 4 stars
• Morningstar Economic Moat Rating: None
• Morningstar Uncertainty Rating: Very High

What We Thought of Paramount Global’s Earnings

Paramount Global PARA continued to post excellent streaming results across all metrics in its third quarter, but the rest of its business remained weak. We were especially disappointed by the lack of television advertising growth during an election season and the firm’s continuing weakness in licensing films and television shows. The perpetual decline in traditional television underscores our no-moat rating, but we still see the stock as materially undervalued relative to our fair value estimate of $20 per share. With the Skydance takeover still expected to close in the first half of 2025, we believe risk is significantly mitigated at current levels.

Direct-to-consumer revenue, which consists mostly of streaming platforms, grew 10% year over year, and adjusted EBITDA was positive for the second straight quarter. The firm added an impressive 3.5 million Paramount+ subscribers, bringing the global total to 72 million, but we don’t see this level of subscriber additions as durable or indicative of organic enthusiasm for the service. Including the service for many Charter cable customers in the United States and a similar bundle with Canal in France drove this strength.

DTC adjusted EBITDA was $49 million, but management noted that this segment is not yet persistently profitable. Though costs are under better control, this quarter benefitted from the timing of content and marketing spending. Management reiterated that Paramount+ should reach domestic profitability in 2025, but we expect the international side to keep the segment unprofitable through 2026.

The swing in DTC EBITDA from a loss of $238 million a year ago was singlehandedly responsible for growth in companywide EBITDA despite total revenue declining 6%. Total EBITDA grew 20% year over year to $858 million. Cost cuts throughout the business have helped support margins, which expanded to 12.7% from 10.0% a year ago, with the company on track to meet its $500 million in annualized cost reductions in 2024.