Paramount Global Inc.: Examining Asset Sales and Market Challenges

Paramount Global Inc.'s stock experienced a significant surge of 27% over two sessions last week. However, despite this recent increase, the stock still remains down by approximately 40% since May. BofA Securities analyst Jessica Reif Ehrlich believes that the company should carefully consider asset sales to address this situation. Nevertheless, she expresses concerns about the feasibility of major deals given the steep declines in the stock's value in recent months.

While Ehrlich acknowledges that Paramount intends to secure the maximum price for its assets, she worries that the pressure on the company's shares could complicate these efforts. She wrote, "Our concern is the longer it takes to execute potential asset sales, the less value they could ultimately garner."

As a result, Ehrlich has downgraded her rating on Paramount shares by two notches — changing it from buy to underperform — in her note to clients on Monday. As of morning trading, shares were down by 4%.

Ehrlich also highlighted several other factors contributing to the challenges faced by Paramount Global Inc. These include a difficult macro backdrop, ongoing secular trends affecting the traditional media industry, the possibility of continued negative free cash flow in the coming year, and the company's increased leverage.

According to Ehrlich, it may take a few years before Paramount can achieve sustainable positive free cash flow, as any improvements seen this year are likely tied to Hollywood strikes.

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