Shares of Paramount Skydance Corp. climbed 8.3% to $11.09 on Friday, ending a six-session losing streak, following a rare double upgrade from Morgan Stanley. The investment bank raised its rating on the stock from Underweight to Overweight, placing renewed focus on the company's pending $110 billion acquisition of Warner Bros. Discovery.
The upgrade comes at a pivotal moment for Paramount, which is set to report its first-quarter earnings on Monday, May 4. Investors are closely watching for updates on the merger, debt levels, and cost-cutting initiatives. Morgan Stanley analyst Sean Diffley raised his price target to $14 from $11, describing the move as the firm's "riskiest and most out-of-consensus call." He cited investor skepticism, the Warner Bros. transaction, and potential synergies from artificial intelligence and consolidation as key drivers.
The Warner Bros. Discovery deal, announced in February, would see Paramount acquire the media giant for $31 per share in cash, valuing Warner's equity at $81 billion and its enterprise value at $110 billion. The combined entity would bring together iconic franchises like Harry Potter and Game of Thrones, bolstering Paramount's streaming and studio operations. Paramount has projected over $6 billion in synergies from the merger, including savings across operations, technology, and corporate functions.
However, the deal faces significant hurdles. On April 23, Warner Bros. Discovery shareholders approved the transaction, shifting the focus to regulatory reviews in the U.S. and abroad. A group of five consumers has filed a lawsuit in federal court in California seeking to block the acquisition, arguing it could lead to higher prices, fewer choices, and reduced film and TV production. Paramount has stated it is aware of the lawsuit and believes it is without merit.
Foreign ownership has emerged as another sticking point. Paramount has filed with the Federal Communications Commission (FCC) to approve non-U.S. investors supporting the deal. According to reports, foreign investors would hold just under 50% of Paramount's equity, though the Ellison family would retain control of voting shares. On Friday, Rep. Sam Liccardo (D-Calif.) urged the FCC to reject the request, adding political pressure to the regulatory process.
Analysts have highlighted the complex landscape. Paolo Pescatore of PP Foresight described it as a "twofold challenge" for management: securing approval and demonstrating long-term value while avoiding further scrutiny of executive compensation. Mike Proulx of Forrester noted that "the real regulatory pressure sits overseas," particularly from European authorities focused on market structure.
If completed, the merger would unite Paramount Pictures, CBS, Paramount+, Pluto TV, Warner Bros., HBO Max, CNN, Discovery, and numerous cable and studio properties under one roof. The combined entity would gain scale to compete with Netflix and other streaming giants, but critics warn it would concentrate significant media, news, and sports rights in a single owner.
Paramount's first-quarter earnings call is scheduled for Monday at 4:45 p.m. EDT. Analysts expect investors to focus on debt, streaming performance, deal progress, and cost management—areas Morgan Stanley considers critical for a bullish outlook. Friday's stock rebound does not resolve the uncertainties surrounding the deal, as regulatory reviews, litigation, and financing arrangements could alter terms, delay closing, or constrain Paramount post-merger.
