Paramount Earnings: Encouraging Results and Outlook, Even as Profit Disappoints

Key Morningstar Metrics for Paramount Global

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

What We Thought of Paramount Global’s Earnings

We think Paramount Global’s PARA fourth-quarter results and the strides the firm made in 2024 should excite investors. There was a hiccup in progress toward streaming profitability, but this was consistent with management’s outlook. The stagnant stock is awaiting completion of the Skydance merger.

Why it matters: It appears the market is overlooking a host of positive data points, as skepticism has built around whether Skydance will get approval for its acquisition of Paramount amid the change in leadership at the Federal Communications Commission and President Trump’s pending lawsuit against CBS.

• The Paramount+ streaming service added 5.6 million net subscribers in the fourth quarter and 10 million for the full year. Direct-to-consumer revenue, which consists mostly of Paramount+, grew 8% year over year in the quarter and 13% for the full year. Total fourth-quarter revenue was up 5%.
• The full-year DTC adjusted EBITDA loss was cut by more than two-thirds to under $500 million, but the loss was $286 million in the fourth quarter—still a 40% improvement year over year. Total fourth-quarter EBITDA dropped by $114 million on film marketing costs and linear television declines.

The bottom line: We maintain our fair value estimate of $20 per share. Although the continuing decline in the traditional television business underpins our no-moat rating, we expect consolidated results to continue improving as the evolution toward streaming matures.

• We are very encouraged by the streaming results on both the top and bottom lines. Management cited big strides in engagement among its Paramount+ subscribers, which should lead to stickiness and more advertising revenue opportunity on a subscriber base now close to 80 million.
• Management reiterated that domestic streaming should reach EBITDA profitability in 2025, and we expect continuing streaming profit improvement to keep firmwide profits trending up throughout our forecast, especially as linear TV declines become less impactful.