Loop Capital unsure what Warren Buffett sees in Paramount, cuts stock to Sell

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By Senad Karaahmetovic

Loop Capital analysts downgraded Paramount Global (NASDAQ:PARA) stock Sell from Hold. The new price target of $14 per share implies a downside risk of about 17% relative to yesterday’s closing price of $16.94.

They see several issues with Paramount, including an unclear path to streaming profitability, declining earnings and cash flow despite a strong content cycle, growing leverage, as well as dividends exceeding free cash flow (FCF).

On top of this, the analysts highlight that Warren Buffett and his Berkshire Hathaway (NYSE:BRKa) became the company’s largest shareholder after buying 14% of the company this year.

“What does Berkshire see, other than a stock highly out of favor? We doubt Berkshire is buying the stock anticipating industry consolidation. Does Berkshire believe PARA's streaming business is worth more that the estimated $10 billion implied by the current valuation? Do they believe if streaming fails PARA can revert to being an arms' dealer, licensing its content, and returning to higher profitability?” they ask in a downgrade note sent to clients.

The analysts see too aggressive Street estimates for 2023 EBITDA and FCF. They also don’t expect Paramount to make near-term changes to its streaming strategy nor do they see a buyer willing to pay a premium for the entire company.

All-in-all, they join other analysts in downgrading Paramount stock in the last two months.

Paramount stock is down over 1.3% in pre-market Friday and nearly 44% year-to-date (YTD).