Key Takeaways
- Paramount Skydance (PSKY) declined approximately 7.7% on Tuesday, closing at $10.37
- Bank of America reduced its price target from $13 down to $11, maintaining its “Underperform” rating
- Fitch slashed PSKY’s credit rating to “junk” territory; S&P placed it on “negative watch”
- The share price has completely wiped out the 21% rally from February 27 following the WBD acquisition announcement
- PSKY shares are down 21.8% since the beginning of the year and trade 47.8% beneath their 52-week peak
Paramount Skydance emerged victorious in the battle for Warner Bros. Discovery. Investors are now questioning: was the price too high?
PSKY shares tumbled approximately 7.7% during Tuesday’s trading session to reach $10.37, continuing a downward trajectory that has affected the stock in six out of the last seven trading days. The equity has completely erased the 21% jump it experienced on February 27, the day Paramount revealed its acquisition of Warner Bros. Discovery following Netflix’s withdrawal from the bidding process.
Paramount Skydance Corporation Class B Common Stock, PSKY
The decline followed Bank of America Securities analyst Jessica Reif Ehrlich’s reiteration of her Underperform stance while cutting her price objective from $13 down to $11. Her assessment was straightforward: while the combination offers long-term upside, the path to achieving those benefits is lengthy and filled with uncertainty.
“PSKY had already been undergoing an integration process from the Paramount Skydance merger — which had only just begun — and now would be adding an even larger entity to the mix,” Ehrlich stated.
The sequence of events is significant. Paramount and Skydance Media finalized their combination just last summer. CEO David Ellison, whose father Larry Ellison co-founded Oracle, had barely commenced that integration effort before taking on an acquisition approximately double the size.
Mounting Debt Concerns Worry Investors
The balance sheet situation is creating anxiety among shareholders. Paramount will shoulder a net debt-to-EBITDA ratio of 4.3 upon completion of the Warner Bros. transaction, even when accounting for anticipated cost synergies. Management claims it can reduce that figure to a 3-to-1 investment-grade threshold within a three-year period — however, credit rating agencies aren’t showing patience.
Fitch Ratings dropped PSKY’s credit standing to junk territory. S&P Global Ratings has placed the company on negative watch. Political examination has introduced an additional complication, with focus on deal financing that includes partial involvement from Middle Eastern sovereign wealth funds.
The merged entity would be enormous. Paramount Pictures combined with Warner Bros. command roughly 30% of the domestic box office market, featuring properties like Star Trek, Harry Potter, and DC Comics. The combination also unites television networks including CBS, TNT, and CNN.
Content Expenditures Continue Rising
Ellison has demonstrated a readiness to spend aggressively. Paramount has already locked in rights to South Park and UFC programming through TKO Group. BofA observed that PSKY “paid well above the next best offer for both of these deals.”
The organization also intends to distribute 30 films annually — 15 from each studio — while increasing streaming content production. Ehrlich characterized that volume as “a significant undertaking” with unpredictable results.
The NFL represents the next major expense. Paramount currently possesses a portion of the league’s broadcasting rights and seeks to retain them in the upcoming negotiation cycle. BofA cautioned the company might either forfeit that package based on cost, or pay a substantial premium to maintain it.
PSKY has fallen 21.8% year-to-date. At $10.31, shares trade 47.8% under their 52-week peak of $19.73 reached in September 2025. The equity has experienced 27 fluctuations exceeding 5% during the past year, highlighting the extreme volatility surrounding this stock.
Paramount did not provide commentary regarding the BofA analyst note.
