Buying Paramount After Warner Bros. News Turns Heads
I plan to initiate a long position in the media giant after news surfaced that it will bid on its largest competitor.
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To boldly go... where I have not gone in years?
Loyal readers can probably remember my long positions in Paramount Global, formerly PARA, back in the early days of the streaming wars. I was confident that Paramount Global would have a leg up on many of the other streamers. They had a well-established news franchise at CBS that would go on to disgrace themselves and pay for it financially during the 2024 presidential campaign.
On top of that, there was a deep library of TV shows and movies as well as live sports. No, I did not think that they could catch the likes of Netflix NFLX or Disney DIS, but I did think that they would do better than they have. Maybe part of that was my juvenile-like fandom of the Stark Trek franchise.
Regardless, I had gotten myself long that stock several times, even thinking that perhaps they would be acquired or have to merge with any of the other legacy media providers straddling the space between legacy broadcast/cable delivery and the internet. By the way, in my opinion, on Paramount+, "Star Trek: Strange New Worlds," Sylvester Stallone's "Tulsa King," all of the "Yellowstone" spin-offs and of course "Billions" are all great programs.
In Better Hands
It was little more than a month ago that Skydance Media successfully closed its $8 billion merger transaction with Paramount Global creating Paramount Skydance PSKY. The new company is being led by CEO and Chair David Ellison, who is the son of Oracle ORCL founder and chair Larry Ellison. With Shari Redstone's leadership out of the way, the hard road of rehabilitating the business and its reputation can begin.
The firm has undergone the process of reorganizing into three business units: Studios, Direct-to-Consumer (streaming) and TV Media. The entire board of directors has been replaced, which can likely only be a positive. Ellison expects to be able to create more than $2 billion in savings through the transition of the entire firm to a single technology platform. Starting next year, Paramount+ and Pluto TV will operate on one unified technology stack.
News
Warner Bros Discovery WBD popped for a roughly 29% gain on a report that the new Paramount Skydance is likely to make a majority cash bid for its larger competitor. The offer is said to be for the entire WBD company to include all of its cable networks, its movie studio and, though I have not seen it in print, I would also think its streaming services are included.
Warner Bros Discovery had reported a tough second quarter on August 7. That stock fell 7% that day and 8% the next day. This was despite the fact that back in June, the firm had announced that it would split into two publicly traded companies. The movie studio and some streaming services would go one way, and the cable networks and other streaming services would go the other.
Readers might find it interesting that back on August 15, the Duquesne Family Office (Yes, Stanley Druckenmiller's operation) had filed a Form 13-F with the SEC that it had taken on a new 6.54 million share long position in WBD. Druckenmiller really is the GOAT in our line of work, gang. He really is. The Druck is one of maybe seven or eight other stock pickers who I will unmute the TV for when I see their faces.
Live Long and Prosper
Paramount Skydance was up on the WBD news too, gaining 15.6% on Thursday. The stock has become wildly volatile since the involvement of the Skydance crew and the exit of the legacy CBS team. Just take a look at the chart going back to the early January low:
Is an investment in PSKY still speculation? Yes. That said, look at the Pitchfork model that had been in place.
There is a good chance that the upper trendline becomes support. Does the stock come in and test its 50-day SMA from above at some point? It could. This is not a "Stocks Under $10" name, but if I ran a "Stocks Under $20" portfolio, this stock would be a holding.
I will not front run my own article, but I do expect to start building a long position in this name over time, incrementally on weakness when it presents itself.
At the time of publication, Guilfoyle had no positions in any securities mentioned.
