Paramount Skydance shares tumbled 8% on Thursday following a downgrade by Arete Research, which moved the media company from a neutral rating to sell and lowered its price target to $2 - a Street low. The firm cited the debt consequences of Paramount’s planned acquisition of Warner Bros. Discovery as the central reason for the shift.
Arete analyst Pierre-Marie d’Ornano said the proposed transaction, due to close in September 2026, would leave the combined company with about $86 billion in gross debt and leverage of roughly six times. Those figures drove Arete’s decision to materially reduce its outlook for Paramount.
"Media mega-mergers are tough," d’Ornano said, and he questioned whether Paramount’s management has the necessary experience to steward what he called a "highly levered balance sheet, which typically requires a different mindset." The analyst pointed to a difficult history for large media tie-ups, noting that estimates are often missed because of "ongoing linear declines, lofty streaming expectations and hard to manage capital structures."
Arete additionally warned that the Paramount-Warner Bros. Discovery combination would likely encounter similar execution and financial-structure challenges, but said the merged company would face "more expensive debt and restrictive maintenance covenants than was the case for its WBD predecessor."
The downgrade trimmed Arete’s price target to $2 from its prior level, while Paramount shares had closed at $9.75 on Wednesday.
The note from Arete centers on balance-sheet strain and the operational complexity of integrating two major media businesses under heavy leverage. Investors reacted quickly to the downgrade, sending the stock lower on concerns that the projected debt load and covenant terms could pressure cash flow and strategic flexibility.
Paramount’s planned takeover of Warner Bros. Discovery remains set for September 2026, and Arete’s assessment emphasizes the financial burdens the deal would impose on the combined entity.