Paramount Stock Spikes on Warner Bros. Takeover as Wall Street Games Out Scenarios

Now that Warner Bros. Discovery has officially lost Netflix as a suitor when the streamer declined to raise its bid, the studio is expected to agree to sell itself in full to Paramount. The next question becomes: what does the megadeal mean for David Ellison’s empire?

Expect the partners to highlight the positive when an agreement is formally unveiled, but for now Netflix disclosed Friday that it received a $2.8 billion termination fee from Paramount to cover the scuttled Warner Bros. deal.

On Wall Street, so far investors have liked what they’ve seen of Paramount’s takeover attempt as PSKY’s stock has soared nearly 20 percent in the day since Netflix backed away on Feb. 26.

Expect the melting ice cube metaphor to come into play sooner or later as well. Analysts have long used that phrase to describe the shrinking profitability of the cable networks business, which used to be Hollywood’s profit engine, amid cord-cutting. The question has been: how quickly can companies merge and cut costs before the ice cube has melted too far? Both Warner Bros. Discovery and Paramount have a lot of cable brands.

With that in mind, here is a look at some early takes from Wall Street observers on the likely WBD-Paramount marriage. The first reactions focused on the good and the bad, and, yes, even the ugly.

“Paramount wins,” Bernstein analyst Laurent Yoon offered in a Friday report. But he soon qualified that quite a bit: “Overpaying for WBD to accelerate growth is perhaps better than facing a mediocre standalone trajectory – at least this gives them a shot at greatness, in our view. But we do not expect them to come out swinging too hard.”

One key reason for his cautiousness is the financial burden. “Assuming they clear regulatory hurdles, Paramount will have nearly $100 billion of debt and more than six times leverage,” the Bernstein analyst pointed out. “Before they can invest in growth, they’ll need to cut deep and fast, and allocate most of their free cash flow to interest expense and delevering. This is effectively the same position WBD was in from ‘22 (post-merger) through ‘25, a period that constrained growth despite having quality studios and IPs.”

MoffettNathanson analyst Rob Fishman is more bullish on Paramount. “This deal should help the company execute on its North Star priorities, especially ‘Scaling Our Streaming Services,’” he wrote. “Paramount+ will gain an injection of subscribers from HBO Max with a lower overlap than the reported 80 percent of HBO subscribers already subscribed to Netflix. While the combined streaming services would still fall well short of Netflix in subscriber count and engagement, the merged entity would emerge as a serious contender to Disney and Amazon.”

Fishman has long argued that owning the whole company makes sense. On Friday, he said it makes “a lot of strategic sense by not only owning a much stronger slate of IP at Warner Bros. and HBO but using the combination of linear networks to generate higher cost synergies, unlocking strategic benefits from pairing CBS News with CNN and leveraging the long-standing CBS-Turner partnership for NCAA’s March Madness Basketball plus other overlapping sports rights.”

One core challenge will be continuing to invest rather than only cutting a way to success. “Paramount/WBD will need to maintain substantial content spend — which, in aggregate, would rank atop its media peers,” Fishman argued. “Meaningful content cost reductions through synergies alone seem difficult to achieve, with Paramount previously committing to 30-plus theatrical releases post-merger plus a significant combined sports rights portfolio.”

The analyst’s conclusion: “The biggest challenge facing Paramount Skydance post-merger will … be balancing the content investment required to reach its strategic goals against the need to manage [debt] leverage. Will PSKY attempt to delever naturally to get back to investment grade, or can the company recapitalize after closing the deal to accelerate the timing?”

In that context, Fishman also wondered about the combined giant’s name. “The future Paramount Skydance Warner Bros. Discovery — they’ll need a better name — could finally transform two sub-scale media companies into a more serious industry player, provided management has the financial flexibility to execute on its vision.”

Guggenheim analyst Michael Morris on Friday also focused on the promise of scale, with his excitement somewhat tempered by the addition of more old-school TV channels. The deal “positions Paramount to meaningfully scale both studio and streaming businesses, which have attractive secular growth profiles,” he wrote. “However, it is also meaningfully increasing its exposure to legacy networks, which face the challenge of cord-cutting, particularly for those networks that lack exclusive sports content.”

Plus, regulators must still decide on the deal. Concluded Morris: “Significant execution and regulatory hurdles remain, noting the company could face scrutiny over its horizontal consolidation of two major studios and concerns about its financing structure, which includes Middle East equity and could trigger a Committee on Foreign Investment in the United States (CFIUS) review.”

Take said, the mega-transaction fits into the broader industry consolidation trend. Highlighted Morris: “The deal advances the industry’s ongoing restructuring as traditional media companies seek scale to compete against technology giants with deeper pockets and global distribution advantages.”

Wolfe Research analyst Peter Supino kept it punny, asking in the headline of a Friday report focused on Paramount’s fourth-quarter results: “Sky Dancers or ‘Well Diggers’?”

“Whether Paramount will prove an exercise in ‘well digging’ (thanks, Landman) or ‘sky dancing’”‘ … hinges on two big assumptions,” he wrote. “First, will the linear TV portfolio, under pressure from divisional cost reductions, decline slowly enough for Paramount to pay down debt? Then, Paramount’s aggressive streaming growth strategy – ‘something for everyone, every day’ – needs to prove itself profitable despite below-peer scale (79 million global subs) and aggressive subscriber growth expectations (2026 consensus +4.8 million). In the fourth quarter of 2025, new management’s second at the helm, both assumptions gained a bit of ground.”

His conclusion: “Paramount Skydance faces a multi-year investment cycle and efficiency realization effort against a difficult backdrop: sub-scale streaming and film assets paired with a declining linear TV portfolio combine into a structurally challenged business.” Once combined with WBD, the company “would face the difficult task of growing share while simultaneously deleveraging, a balance that could come at the expense of content investment,” Supino highlighted, ending on a downside scenario. “Paramount could continue to lose share over the long term, resulting in shrinking cash flows and a deteriorating content flywheel that further pressures its competitive position.”