A media giant recently rebranded itself, dropping two venerable names to focus on its streaming efforts.
But while the move may make sense, Real Money Pro’s Stephen Guilfoyle isn’t sticking around.
“I'm out of patience with the soon-to-be Paramount Global (PARA) ,” Guilfoyle wrote recently on Real Money Pro. “I'm going to try to trade my way out of the entertainment giant.”
Guilfoyle’s disenchantment with the former ViacomCBS is twofold. For one thing, it’s “hard to be up (or down) very much when a stock trades sideways for nine or 10 months,” he wrote.
More importantly the company is faced with heavy spending needs as it tries to build up its streaming business.
Paramount “is now targeting 100 million streaming subscribers by 2024, up from the previously laid out goal of 65 million to 75 million, while upping DTC (direct to consumer) revenue to $9 billion by 2024 from prior guidance of $6 billion,” Guilfoyle wrote. “The plan appears to be to fund what needs to grow even at a loss by subsidizing that growth with what appears to be an ebbing but still highly profitable business, cable television,” he added.
That's going to add to a situation in which tangible book value is already negative. "We don't love that. Nor do we love negative free cash flow," Guilfoyle said.
It's not that Paramount's plans won't work. The company "is going the right way in terms of reorganization as well as in content creation. The show ‘1883’ is probably one of the best shows in the history of streaming," according to Guilfoyle. "That said, there is no way to avoid the increased margin pressure that this company is likely to face in the near to intermediate future.”
