(Reuters) – Paramount Global shares surged 10% on Friday, after the media company narrowed the 2023 loss forecast for its fast-growing streaming business as investments peaked a year ahead of target.
After years of chasing subscriber growth through hefty investments, streamers are now prioritizing profitability in the face of investor pressure, leading businesses including Disney+ and HBO Max to raise prices and introduce ads to boost revenue.
Paramount’s stock is on course to add nearly $800 million to its market value, if gains hold. Rivals Walt Disney and Warner Bros Discovery rose between 2% and 4%.
The companies had also rallied on Thursday, with Paramount gaining 10%, after positive results from streaming device maker Roku raised hopes of a rebound in the advertising market.
“We now expect DTC (direct-to-consumer) losses in 2023 will be lower than in 2022 – meaning streaming investment peaked ahead of plan,” Paramount CEO Bob Bakish said.
Despite the industry’s focus pivoting to profitability, analysts do not see a clear path to that target, with brokerage Needham believing that Paramount could be bought by a larger streaming competitor.
“At an $7 billion market cap plus about $14 billion of net debt, we believe PARA is too small to win the streaming wars,” Needham analysts said.
“It is bite-size enough to be acquired by a larger streaming competitor for its deep library of film and TV content, as well as its sports rights and news assets.”
Paramount, owner of the studio behind films like “Titanic” and “The Godfather”, declined to comment on the Needham statement.
The company has been partially shielded from the impact of the Hollywood strikes thanks to its live sports content, which includes college football and the NFL, and its library of international original content.
(Reporting by Samrhitha Arunasalam in Bengaluru; Editing by Devika Syamnath)