Key Takeaways
- Paramount Skydance (PSKY) plunged approximately 7.7% on Tuesday, closing at $10.37
- Bank of America reduced its price target from $13 down to $11 while maintaining an “Underperform” rating
- Fitch downgraded the company’s credit rating to “junk” territory; S&P placed it under “negative watch”
- The share price has completely wiped out its 21% rally from February 27 following the WBD merger announcement
- Year-to-date, PSKY has declined 21.8% and trades 47.8% beneath its 52-week peak
Paramount Skydance emerged victorious in the battle for Warner Bros. Discovery. But investors are now questioning: was the price too high?
Shares of PSKY tumbled approximately 7.7% during Tuesday’s trading session, settling at $10.37. This marked the sixth decline in seven trading sessions. The stock has completely erased the impressive 21% jump witnessed on February 27, when the company unveiled its acquisition of Warner Bros. Discovery following Netflix’s withdrawal from negotiations.
Paramount Skydance Corporation Class B Common Stock, PSKY
The sharp downturn followed Bank of America Securities analyst Jessica Reif Ehrlich’s decision to maintain her Underperform stance while cutting her price objective from $13 down to $11. Her assessment was straightforward: while the combination offers long-term promise, the path to achieving it remains extended 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 wrote.
The sequence of events is crucial. Paramount and Skydance Media finalized their combination just last summer. CEO David Ellison, offspring of Oracle co-founder Larry Ellison, had only just initiated that integration process before taking on an acquisition approximately double in magnitude.
Mounting Debt Concerns Spook Market
The financial metrics are causing investor anxiety. Upon completion of the Warner Bros. acquisition, Paramount will carry a net debt-to-EBITDA ratio of 4.3, even after accounting for anticipated cost synergies. Management projects reaching a 3-to-1 investment-grade threshold within a three-year window — however, credit rating agencies are acting now.
Fitch Ratings has relegated PSKY’s credit to junk territory. S&P Global Ratings has placed the company under negative observation. Political oversight has introduced additional complications, with focus on deal financing partially involving Middle Eastern sovereign wealth funds.
The merged entity would command substantial market presence. Paramount Pictures combined with Warner Bros. would control roughly 30% of U.S. theatrical box office, featuring properties including Star Trek, Harry Potter, and DC Comics. The transaction also unites broadcast networks such as CBS, TNT, and CNN.
Aggressive Content Investment Strategy
Ellison has demonstrated readiness to spend aggressively. Paramount has already locked in rights to South Park and UFC programming through TKO Group. Bank of America observed that PSKY “paid well above the next best offer for both of these deals.”
The entertainment giant also intends to distribute 30 theatrical releases annually — 15 from each production house — while expanding streaming content output. Ehrlich characterized this production volume as “a significant undertaking” with unpredictable returns.
NFL broadcasting rights represent the next major financial challenge. Paramount currently maintains partial league media rights and seeks to retain them in upcoming negotiations. BofA cautioned the company risks either losing the package due to cost considerations, or absorbing substantial price increases to preserve it.
PSKY has fallen 21.8% since the start of the year. Trading at $10.31, shares remain 47.8% under the 52-week peak of $19.73 reached in September 2025. The stock has experienced 27 single-day movements exceeding 5% during the past year, underscoring the significant volatility surrounding this security.
Paramount did not respond to requests for comment regarding the Bank of America analysis.
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