While those aspects have trended well – and credit due to management – it increasingly feels like a myopic view on the stock,” the analyst explained. “We’ve been bulls on Paramount’s content and streaming execution. Of the group, only Disney will have more EBITDA in about five years.”Īll this led Cahall to conclude that “fundamentals are strongest for Disney and Fox,” reduce stock price targets for other sector stocks and downgrade his rating on Paramount Global from “overweight” to “equal weight,” cutting his price target from $40 to $19. Across the media sector that he covers, “we think linear network earnings before interest, taxes, depreciation and amortization (EBITDA) margins are above 30 percent this year and will be below 10 percent by 2032, with linear EBITDA across the sector going from $33 billion this year to $20 billion in 2027 and $8 billion by 2032E,” the analyst estimated. “Streaming EBITDA is -$9 billion today and will only be around $8 billion in 2027. What does all this mean for financials? “Streaming margins are still being proven, and it’s overly optimistic to assume that they can approximate linear anytime soon,” Cahall wrote. The base bundle is now around $80 per month (+7-8 percent over a decade) and could hardly be called skinny, so we see this revenue going ex-growth too.” And he now forecasts cord-cutting to reduce the industry count to around 50 million bundle subscribers by 2027. New AVOD from Netflix, Disney and Innovid will slowly but surely cannibalize linear ads. It is/was a great business, and its decline is going to hurt media stocks.”Īrgued Cahall: “The over-monetization cracks are clear: on advertising, average revenue per user (ARPU) for cable/broadcast primetime viewers has gone from $54/$57 per month in 2007 to $113/$104 per month today. “With sports shifting over too, and Netflix and Apple and Amazon adding to streaming content, the foundations of the bundle are crumbling. In 2023, media stocks’ non-sports content value on streaming will reach around $31 billion, exceeding that on linear, “with their streaming content value +10 times since 2019,” he estimated. Ryan Reynolds, Rob McElhenney Set for Special Award From People of Wales
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