On Thursday, Rosenblatt Securities adjusted its outlook on Paramount Global (NASDAQ: PARA), reducing the share price target to $9 from the previous $12, while maintaining a Sell rating.
The firm highlighted Paramount's fourth-quarter 2023 earnings report, which showed mixed results but included evidence of effective cost controls. Paramount's announcement of plans to improve free cash flow and OIBDA by 2025 was noted as a key point in the report.
Despite these plans, Rosenblatt expressed ongoing caution regarding Paramount's future. The increasingly competitive advertising market fuels the firm's skepticism. The influx of new inventory and competitors, such as Amazon (NASDAQ:AMZN), Walmart (NYSE:WMT), and Netflix (NASDAQ:NFLX), who are expanding their advertising efforts, is expected to create challenges for Paramount.
The current Average Revenue Per User (ARPU) strength in Paramount's Direct-to-Consumer (DTC) segment is also a concern for Rosenblatt. The firm anticipates this will diminish once the impact of Showtime's inclusion into Paramount's service is fully realized in the third quarter of 2024.
Rosenblatt predicts that slower growth and questions about market saturation will become more pronounced in the DTC sector, while traditional TV continues to face secular pressures.
The firm's revised price target reflects these concerns, suggesting that Paramount may face a tougher road ahead in a market that is becoming increasingly crowded and competitive. The analysis by Rosenblatt underscores the challenges media companies like Paramount face as they navigate the evolving landscape of television and streaming services.
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