Wolfe Research analysts caution against buying stock in media giants Paramount Global and Warner Bros. Discovery.
Paramount Global (PARA) Takes the Hit
Wolfe Research analyst Peter Supino and his team have downgraded shares of Paramount (ticker: PARA) from Neutral to Underperform. With a lowered price target of $14, the potential dip in TV advertising looms large over the company.
Warner Bros. Discovery (WBD) Shareholders Alerted
Similarly, Wolfe Research has downgraded Warner Bros. Discovery shares from Outperform to Peer Perform. Concerns about diminishing linear advertising exposure have motivated this decision. The analyst also removed their previous price target of $20.
According to the analysts, “We downgrade PARA and WBD due to significant linear advertising exposure.”
Uncertain Future of TV Advertising
Supino’s note suggests that both Paramount and Warner Bros. may face a decline in upfront deals, potentially impacting their overall outlooks. The upcoming months could see a decrease in such deals, which are typically agreed upon well in advance of airing the ads. This scenario would likely result in diminished forecasts, which tends to push stock prices down.
Market Response
In Friday’s trading, both Paramount and Warner Bros. experienced declines of 2.1% and 0.8% respectively. The companies have not yet commented on the situation.
Performance Check: Paramount vs. Warner Bros.
Paramount has faced a 2% decline this year, attributed to weaker-than-expected first-quarter profits. Management cited “cyclical ad softness” and subsequently reduced its dividend. Lower consumer spending and weak markets have contributed to a decrease in ad spend across many companies. However, there are signs of improvement in certain categories, according to Chief Financial Officer Naveen Chopra.
The Bigger Picture: S&P 500
While Paramount and Warner Bros. navigate their own challenges, the broader S&P 500 index has recorded a 15% gain thus far this year.
Note: Contact information and affiliations have been omitted for readability.