Wells Fargo has resumed its coverage of media giants Netflix (NFLX) and Paramount Skydance Corporation (PSKY), citing the recent change in ownership structure following the months-long bidding war for Warner Bros. Discovery (WBD). The research firm views the combined entity as facing challenges, including a dwindling linear ecosystem and high debt levels.
However, Wells Fargo remains optimistic about Netflix’s prospects, predicting aggressive content growth and capital allocation, particularly in sports. They forecast potential annual costs of $500M to $1B for NFL game broadcasts. Paramount Skydance Corporation, on the other hand, has been downgraded to “underweight” with a price target of $10.
The firm notes that the combined entity’s earnings will primarily come from an increasingly crowded video market, and equity holders are exposed to valuation risks if the company derates due to economic or AI-related concerns. Despite these challenges, Wells Fargo sees potential for Paramount+ and HBO to thrive in a creative-centric environment.
Source: https://seekingalpha.com/news/4562248-wells-fargo-resumes-coverage-on-netflix-and-paramount-following-wbd-bidding-war