Paramount Skydance Stock: Buy or Sell After Merger and Short Squeeze?

Paramount Skydance (NASDAQ: PSKY) shares have surged 15% since its merger with Skydance Media on August 7, with plans to revolutionize the entertainment industry through a tech-centric approach. Despite being overvalued according to all Wall Street price targets, the company is making significant moves to unify its content library and infrastructure, and acquire new sources of content, such as UFC rights. The recent short squeeze has left shares above targets, but investors should consider whether Paramount Skydance can make its money back on the UFC deal and maintain its attractiveness to subscribers.

Paramount Skydance (NASDAQ: PSKY) shares have surged 15% since its merger with Skydance Media on August 7, signaling investor confidence in the company's tech-centric approach to revolutionize the entertainment industry. Despite being overvalued according to Wall Street price targets, the company is making significant moves to unify its content library and infrastructure and acquire new sources of content, such as UFC rights. However, the recent short squeeze has left shares above targets, raising questions about the company's ability to make its money back on the UFC deal and maintain its attractiveness to subscribers.

The merger, valued at approximately $28 billion, combines Paramount's sprawling legacy in film, television, and sports with Skydance's premium content production prowess. However, the company faces significant challenges, including the need to cut costs through aggressive layoffs while simultaneously investing billions in high-risk content bets in a saturated streaming market [2].

Paramount plans to lay off between 2,000 and 3,000 employees by early November, as part of its post-merger cost-cutting efforts [1]. This move aims to achieve $2 billion in annual cost synergies, mirroring broader trends in the media sector. The challenge for New Paramount is to avoid the recurring layoffs that plagued Paramount under previous leadership, which eroded morale and institutional knowledge, and to ensure that cost-cutting does not undermine the creative infrastructure needed to produce hit content [2].

While the layoffs signal a return to fiscal discipline, New Paramount is simultaneously doubling down on aggressive content investments. The $7.7 billion UFC media rights deal and the $400 million+ contract for the Duffer Brothers (creators of Stranger Things) exemplify this strategy. These moves are designed to differentiate the company in a crowded streaming landscape, where platforms like Netflix and Disney+ have already saturated the market with high-budget originals [2].

However, the ROI on such investments remains uncertain. From 2020 to 2025, the industry has seen a shift toward ad-supported models and AI-driven production tools, which offer lower costs and faster iteration. Social platforms like TikTok and YouTube have also disrupted traditional content economics, leveraging user-generated content and algorithmic engagement to capture ad revenue at a fraction of the cost of studio productions [2].

The merger's long-term success will depend on three factors: successful integration, content ROI, and market adaptability. David Ellison and Jeff Shell must unify the corporate cultures of Paramount and Skydance without alienating key talent, the UFC and Duffer Brothers deals must translate into subscriber growth and advertising revenue, and New Paramount must pivot quickly to emerging trends in content creation and distribution [2].

Investors should monitor execution closely. The stock's performance over the next 12–18 months will likely hinge on two metrics: subscriber and revenue growth and cost synergy realization. A critical risk is that the layoffs could backfire, triggering a talent drain or operational inefficiencies. Conversely, if the merger succeeds in streamlining operations while delivering hit content, the stock could outperform the broader media sector [2].

The Paramount-Skydance merger is a defining moment for media consolidation in the streaming era. While the cost-cutting strategy aligns with industry trends, the simultaneous high-risk content bets expose the company to volatility. For investors, the key is to monitor execution: successful integration, content performance, and adaptability to market shifts will determine whether this merger becomes a blueprint for survival or a cautionary tale of overreach [2].

References:
[1] https://www.nasdaq.com/articles/paramount-reportedly-lay-thousands-after-merger-skydance-media
[2] https://www.ainvest.com/news/paramount-skydance-merger-layoffs-strategic-break-moment-media-consolidation-shareholder-2508/
[3] https://thedesk.net/2025/08/paramount-layoffs-expected-in-november/