PARA stock price is struggling: Was Shari Redstone wrong?

Paramount Global (NYSE: PARA) stock price has underperformed the broader market in 2022. The stock has dropped by more than 15% while the Dow Jones, S&P 500, and Nasdaq 100 indices have jumped by double-digits. In all, Paramount shares have crashed by over 84% from their highest point in 2021.

Shari Redstone strategy is not working

Paramount Global is a company that was formed in 2019 by merging Viacom and CBS. The deal was pushed by Shari Redstone, the daughter of Sumner Redstone. Her goal was to create a giant media company that would have enough muscle to compete with the likes of Netflix and Disney.

However, four years after the deal, there are signs that the combined entity is not doing well. The clearest sign is that its stock has plunged, giving it a market cap of over $9 billion. At its peak, the combined company was valued at over $25 billion.

It is clear why the combination is not working. Paramount Global is made of both traditional television stations and a forward-looking technology platform. Its television channels were in the Viacom side while its streaming solutions were in the CBS side.

Therefore, while Paramount+ is seeing strong user and revenue growth, its traditional televisions are not growing as the concept of cord-cutting continues. At the same time, the company is no longer as profitable as it was a few years ago as it boosts its investments in content. Its net loss in the TTM has jumped to over $1.1 billion.

Paramount’s problems are similar to those faced by Warner Bros. Discovery (WBD), which owns Max and television stations like CNN, Food Network, and OWN. Like PARA, WBD stock price has crashed by over 57% since its IPO.

PARA vs QQQ vs SPY

Shari Redstone might consider a sale

Most analysts believe that a sale would be the best way forward for Paramount Global, a company with over $15 billion in long-term debt. In a recent statement, Shari Redstone expressed an openness to sell the company.

On the positive side, there are companies that would love to have Paramount+ and its wide collection of assets. The best combination in such a deal would be Apple, which owns the fledgling Apple TV+. According to the WSJ, the two companies have talked about bundling Paramount+ with Apple TV+.

Warner Bros. Discovery (WBD) would be another potential acquirer. The challenge for WBD is that it has a mountain of debt and is struggling to achieve its promised savings. 

In all, the challenge for any deal to acquire Paramount Global is its television networks. A good example of this is its plans to sell BET Media earlier this year. The company shelved the goal after it received bids worth between $3 billion and $4 billion, lower than its target of over $10 billion.

Looking ahead, the performance of PARA stock price will depend on whether the company returns to growth or whether a potential acquirer emerges. 

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