Debt Will Eat Paramount's Future Returns

Harold L. Vogel, CFA1.68K FollowersFollow5ShareSavePlay(6min)Comment(1)SummaryParamount faces massive post-merger debt, likely reaching $79-80 billion with junk-level credit and high-interest costs.Projected operating profits are unlikely to offset substantial new debt service, even with optimistic synergy estimates.Synergy claims of $2 billion are viewed skeptically, as such savings are rarely realized and often disrupt core creative talent.I rate both PSKY and NFLX as sell, expecting stagnant or declining earnings and dead money for investors. Getty Images WBD Players The “winner” of the contest for Warner Bros. Discovery (WBD) is among the losers. New debt yet to be issued will be far from investment grade (i.e., “junk” down from BB- to BBB+ according to Fitch Ratings). This article was written byHarold L. Vogel, CFA1.68K FollowersFollowHarold L. Vogel, Ph.D., CFA, is CEO of Vogel Capital Management in New York City and former Adjunct Professor of Finance and Economics, Columbia University Graduate School of Business. He is author of Financial Market Bubbles and Crashes, 3rd ed. (Dec 2021), Entertainment Industry Economics, (10th ed. 2020), and Travel Industry Economics, (4th ed. (2021). Articles include "An Analytical Review of Volatility Metrics for Bubbles and Crashes (with R. Werner), International Review of Financial Analysis, March 2015. "Playing with Power-Law Curves: A New Way to Analyze Market Structures and Sectors," Archives of Business Research, vol 10, No 8 August 25, 2022. See trackler.com website.Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.