Paramount Skydance (PSKY) Stock Plunges 8% Following Bank of America Downgrade

Key Takeaways

• Paramount Skydance (PSKY) declined approximately 7.7% on Tuesday, closing at $10.37
• Bank of America reduced its price target from $13 down to $11 while maintaining its “Underperform” stance
• Fitch downgraded the company’s credit rating to junk territory; S&P issued a negative watch warning
• The shares have completely wiped out the 21% rally that followed the Warner Bros. Discovery acquisition announcement on Feb. 27
• Year-to-date, PSKY has fallen 21.8% and trades 47.8% beneath its 52-week peak

Paramount Skydance emerged victorious in the battle for Warner Bros. Discovery. But investors are now questioning: was the price too high?

Shares of PSKY tumbled approximately 7.7% during Tuesday’s trading session, settling at $10.37. This marks the sixth decline in seven trading days. The stock has completely erased the impressive 21% jump it experienced on Feb. 27, following the company’s announcement of its Warner Bros. Discovery acquisition after Netflix exited the bidding process.

Paramount Skydance Corporation Class B Common Stock, PSKY

The sharp decline followed Bank of America Securities analyst Jessica Reif Ehrlich’s decision to maintain her Underperform rating while cutting her price objective from $13 down to $11. Her analysis painted a challenging picture: while the merger offers long-term upside potential, the path to achieving it remains lengthy and filled with uncertainties.

“PSKY had already been undergoing an integration process from the Paramount Skydance merger — which had only just begun — and now would be adding an even larger entity to the mix,” Ehrlich noted in her research.

The context is crucial. Paramount and Skydance Media finalized their combination just last summer. CEO David Ellison, whose father Larry Ellison co-founded Oracle, had only recently begun that integration work before taking on an acquisition approximately double in size.

Mounting Debt Concerns Spook Investors

The balance sheet situation is causing unease among market participants. Upon completion of the Warner Bros. transaction, Paramount will carry a net debt-to-EBITDA multiple of 4.3, even after accounting for anticipated cost savings. Management believes it can reduce this ratio to an investment-grade 3-to-1 level within a three-year timeframe — however, credit rating agencies are responding now.

Fitch Ratings has lowered PSKY’s credit rating into junk territory. S&P Global Ratings has put the company under negative credit watch. Adding to investor concerns, the deal has attracted political scrutiny due to financing arrangements that partially involve Middle Eastern sovereign wealth funds.

The merged entity would create an entertainment powerhouse. Combined, Paramount Pictures and Warner Bros. command roughly 30% of the domestic box office market, bringing together beloved franchises such as Star Trek, Harry Potter, and DC Comics properties. The deal also unites major television networks including CBS, TNT, and CNN.

Rising Content Expenditures

Ellison has demonstrated an aggressive spending approach. Paramount has already locked in rights agreements for South Park and UFC programming through TKO Group. Bank of America’s research highlighted that PSKY “paid well above the next best offer for both of these deals.”

The studio plans to distribute 30 theatrical releases annually — 15 from each production house — while simultaneously expanding streaming content production. Ehrlich characterized this production volume as “a significant undertaking” with unpredictable results.

The NFL presents another major financial question mark. Paramount currently holds a portion of the league’s broadcast rights and seeks renewal in the upcoming negotiation cycle. BofA cautioned the company faces a difficult choice: either lose the package to a competitor willing to pay more, or commit to a substantial price increase to retain it.

PSKY has dropped 21.8% since the beginning of the year. Trading at $10.31, the stock sits 47.8% below its 52-week high of $19.73 reached in September 2025. Over the past twelve months, the stock has experienced 27 price swings exceeding 5%, illustrating the extreme volatility surrounding this equity.

Paramount chose not to provide commentary on Bank of America’s research report.