PSKY Approaches Q4 Earnings with Streaming Momentum but High Execution Risk After WBD Bid Rejection

What happened

Paramount Skydance Corp heads into its Q4 2025 earnings report with streaming showing profitability, as Q3 2025 DTC revenue grew 17% and ARPU rose 11%, driven by content and price actions. However, the recent rejection of its all-cash takeover bid for Warner Bros. Discovery highlights management's aggressive, leverage-heavy M&A strategy that investors view as risky. DeepValue's master report rates PSKY as a POTENTIAL SELL, citing a fragile valuation at $12.13 that discounts successful streaming monetization and cost savings without adequate downside cushion. Key risks include structural linear TV decline, limited asset valuation headroom, and the potential for execution stumbles in the $3 billion cost-reduction program. Investors now await Q4 results to confirm streaming profitability and cost progress, but the stock already prices in much of the optimistic turnaround narrative.

Implication

The upcoming Q4 earnings will test PSKY's ability to sustain streaming momentum and deliver on its $3 billion cost-savings target, with any miss likely exacerbating valuation concerns. A positive report could provide short-term support, but the rejected WBD bid underscores ongoing capital allocation risks that could resurface with future large-scale, debt-funded acquisitions. Given DeepValue's POTENTIAL SELL rating and trim price of $15, investors might consider reducing exposure above the current $12.13 and await a more attractive entry near $9.50, where downside is better priced. Over the next 6-12 months, monitor key catalysts like post-price hike subscriber trends, UFC engagement data, and management's de-leveraging progress to reassess the investment thesis. Failure to meet streaming or cost targets could trigger a revaluation, as the stock lacks a meaningful margin of safety against operational or financial setbacks.

Thesis delta

The rejection of the WBD bid temporarily reduces near-term leverage risk but does not fundamentally alter the high-risk turnaround thesis, as PSKY remains dependent on flawless execution of its streaming and cost-saving plans. Focus now shifts to Q4 earnings and early 2026 metrics to validate whether DTC growth and synergy capture can support the current valuation, with any deviations likely to reinforce the negative skew.