At Least Warren Buffett Likes Paramount Stock
Paramount’s stock surged Tuesday after Warren Buffett’s Berkshire Hathaway disclosed in public filings that it dramatically upped its stake in the company that houses Paramount Pictures, CBS, Showtime, Paramount+, Pluto TV, and other key brands. As a result of the billionaire’s confidence, shares in Paramount (PARA) soared more than 9 percent.
Buffett’s Berkshire Hathaway now has 91 million shares of Paramount. According to Wells Fargo equity analyst Steven Cahall, with around 15 percent of class B shares valued at $1.7 billion, Buffett’s company is Paramount’s largest outside investor.
In mid-May, Buffett disclosed his investment company purchased 75 million shares of PARA. At the time, PARA was trading much higher and the stake was worth $2.6 billion. That revelation goosed the stock from under $27 per share to the low $30s. Weeks later, Paramount’s “Top Gun: Maverick” came out and eventually became the year’s biggest box-office hit to the tune of a $1.4 billion worldwide, carrying shares even higher.
By early November, PARA traded for less than $16 per share. Before a recent rally, including Buffett’s disclosure late Monday, it had been a November not to remember for Paramount Global. A federal judge blocked its $2.2 billion sale of publisher Simon & Schuster to Penguin Random House, it missed on its Q3 earnings and revenue forecasts, and Wells Fargo downgraded PARA stock to a “Sell.”
That said, Paramount+ in its fiscal third quarter added 4.6 million subscribers for 46 million overall; Buffett’s increased stake could point to his optimism about its place in the streaming wars. It could also mean that Paramount is a ripe acquisition target, as some analysts suggested. Paramount chief Bob Bakish himself hinted in March that the company is in part positioning itself to be purchased by a larger entity.
KeyBanc Capital Markets analysts interpreted this week’s double-down investment by Buffett as a sign that Berkshire believes Paramount Global “will be successful in the streaming wars or is a likely acquisition target.” To KeyBanc analysts Brandon Nispel and Evan Young, the latter is the more realistic option. “Likely buyers would be a tech company, or other Media peers, which could leverage PARA’s library and film studio to immediately become a top competitor,” they wrote.