Paramount Global: Streaming Triumphs vs. JPMorgan's Doubts – A Contrarian Opportunity?

The Contrarian Play: While JPMorgan downgraded Paramount Global (PARA) to "Underweight," the company's streaming division is surging ahead. Is this a case of Wall Street missing the forest for the trees? Let's dig into the data.

The Case for Optimism: Streaming's Golden Moment
Paramount's Q1 2025 results reveal a streaming division on fire. Paramount+ now boasts 79 million global subscribers, up 11% year-over-year, with revenue soaring 16% to $2.04 billion. The key drivers? A slate of hit originals like Landman (top new streaming series for two quarters) and MobLand (a global smash). These shows aren't just attracting viewers—they're keeping them hooked. Global watch time per user rose 17% year-over-year, a metric that matters for retention and ad revenue.

Even better, the streaming losses are narrowing. The DTC segment's operating income improved to $550 million, a $177 million jump from last year. Management is targeting domestic profitability by 2025, and with churn rates dropping and Pluto TV's ad-supported model pulling in 31% more viewing hours, the path to profitability is clear.

JPMorgan's Concerns: Debt, Ads, and Delayed Mergers
JPMorgan's downgrade isn't without merit. Analysts cite ad revenue declines (down 19% overall due to the Super Bowl absence) and persistent streaming losses expected through 2026. They slashed their 2025 OIBDA forecast by 10%, citing risks like PayTV erosion and a $15.5 billion debt pile.

The firm also warns of potential credit downgrades, which could force institutional selling and pressure the stock. Meanwhile, the $8 billion Skydance merger faces regulatory hurdles, delaying synergies.

Why the Bulls Have an Edge
Here's the rub: JPMorgan's focus on short-term pain may be missing the long-term upside. Let's break it down:

1. Streaming's Momentum Outpaces Peers:
   
   Paramount+ is adding subscribers faster than Netflix or Disney+ in key markets like the U.S. and the UK. Its focus on localized content (e.g., UK's top-rated SVOD service) and Pluto TV's role as a "funnel" to Paramount+ are strategic wins.

2. Advertising Isn't Dead—Just Evolving:
   While overall ad revenue dipped, DTC ad revenue fell only 9%—a far cry from the 19% drop in total ad revenue. Exclude the Super Bowl, and ad revenue was flat. With Pluto's data insights boosting ad targeting, this segment could stabilize.

3. Debt Is Manageable, Not a Death Sentence:
   Yes, PARA's leverage ratio is high ($15.5B debt vs. $2.6B LTM EBITDA). But the May credit agreement amendment—raising the unrestricted cash cap and tweaking EBITDA metrics—buys time. The DTC segment's improving cash flow ($576M free cash flow projected) is offsetting declines elsewhere.

4. Skydance: A Catalyst in Disguise:
   Even without the merger, Paramount's content pipeline is robust. Skydance's film and TV assets, if approved, could supercharge growth. The delay is a setback, but not a dealbreaker.

The Contrarian Calculus
The bears are right about the risks—debt, ad woes, and regulatory delays. But they're underweighting the streaming tailwinds. With subscriber growth hitting double digits, content hits driving engagement, and Pluto TV's scalability, Paramount's DTC division is a growth engine that could outpace its legacy media drag.

The Bottom Line
At current prices, PARA looks undervalued. The stock's YTD performance has been volatile, but the streaming story is too strong to ignore. Investors willing to look past near-term headwinds and bet on the path to profitability may find this a rare contrarian opportunity in a crowded streaming market.

Act fast—this could be the setup for a multi-year winner.