Paramount Skydance Stock Surges 48% in Two Days, Short Squeeze Risk High

Paramount Skydance (PSKY.US), the newly merged entity formed by Paramount Global and Skydance Media, witnessed a remarkable surge in its stock price over two consecutive trading days, Tuesday and Wednesday. The stock rose by double digits, prompting at least one analyst to draw parallels with the 2021 meme stock frenzy. Evercore ISI analyst Kutgun Maral expressed his bewilderment, stating, "When a stock jumps 37% in a single day and 48% over two days without any fundamental news to support it, what can a fundamental analyst say?"

Despite a drop of over 4% on Thursday, the volatility reminded Maral of the sustained short squeeze that occurred in 2021. During that period, Paramount and its traditional media peers saw their stock prices surge dramatically before plummeting, with many traditional media stocks still not fully recovered. Maral was particularly surprised by the recent surge in Paramount Skydance's stock price, given that the newly formed company only began trading last Friday and has yet to provide updated financial projections. He maintained a "hold" rating on the stock, noting that the current valuation appears to be overinflated.

Other analysts may share similar sentiments. The average target price for Paramount Skydance, as set by analysts, is $12, suggesting a potential decline from its current level. Thirteen analysts, including Maral, recommend holding the stock, while only three suggest buying, and nine advise selling.

Indications suggest that the recent rally in Paramount Skydance's stock is putting pressure on short sellers. Approximately 14% of the company's floating stock is sold short. The rapid rise in stock price has increased the risk of a short squeeze for Paramount Skydance, where short sellers may be forced to buy back shares to cover their losing positions. The proprietary "short squeeze risk" indicator from S3 Partners LLC rose to 100 on Thursday, signaling a significantly elevated risk of a short squeeze occurring.

Ihor Dusaniwsky, managing director of predictive analytics, described the stock as "relatively concentrated in short interest but highly susceptible to a short squeeze." He added that short sellers have incurred losses totaling over the past seven days based on market value calculations.