By Senad Karaahmetovic
Bank of America analyst Jessica Reif Ehrlich sees Paramount Global (NASDAQ:PARA) reporting strong Q2 results on the back of the robust performance of the blockbuster movie ‘Top Gun: Maverick.’
Top Gun’s excellent performance is likely to “offset some of the incremental softness in the advertising market.”
“Similar to peers, PARA is seeing softness in the advertising market, particularly in scatter where visibility is limited. That said, PARA appears to be generally pleased with its performance in the Advertising upfronts where it was able to secure high-single digit CPM increases (ex. digital) and sold a larger percentage of inventory in broadcast relative to last year. Meanwhile, digital advertising demand should continue to deliver healthy growth, but also not be immune from the broader macro challenges. In addition, PARA is also moderating adloads on Pluto to boost engagement, which could weigh on near term DTC advertising trends,” Reif Ehrlich further explained in the client note.
According to recent media reports, The Top Gun sequel has now made over $1.1 billion globally.
Still, the analyst cut the PARA price target to reflect the recent market correction.
“Amid a wave of industry consolidation, we continue to view PARA as having attractive assets. However, it does not appear to us a sale is imminent given its near term streaming aspirations. Absent such a move, we believe shares will remain range bound near term especially as cyclical/macro risks are elevated,” the analyst concluded.