Paramount Skydance (PSKY) Stock Gains After Supreme Court Intervenes in Merger Lawsuit

TLDR

• PSKY stock gained nearly 1.5% after the Supreme Court ordered 12 states opposing the Paramount-Warner Bros. Discovery merger to respond to a challenge from Iowa and Montana.
• The court gave the coalition, led by California AG Rob Bonta, two weeks to respond but has not yet ruled on whether to allow the complaint.
• Wellington Management made a new $3.23 million investment in PSKY, buying 327,700 shares in Q2.
• Paramount beat Q2 earnings estimates, posting $0.18 EPS vs. the $0.15 consensus, on revenue of $6.91 billion.
• Wall Street holds a “Reduce” consensus on PSKY with an average price target of $11.38, with 8 Sells, 5 Holds, and 2 Buys.

Paramount Skydance (PSKY) got a boost Thursday when the Supreme Court inserted itself into the legal battle surrounding the company’s pending merger with Warner Bros. Discovery. The stock climbed nearly 1.5% in the final minutes of trading, with PSKY opening the day at $10.22.

Paramount Skydance Corporation Class B Common Stock, PSKY

The court ordered a 12-state coalition, largely led by California Attorney General Rob Bonta, to respond within two weeks to a challenge filed by Iowa and Montana. Those two states argue that since the federal government already approved the merger and 38 states did not oppose it, the coalition of 12 has no standing to block it.

The Supreme Court has not granted Iowa and Montana’s Motion For Leave to File a Bill of Complaint, but it has not dismissed it either. That leaves the door open for the legal challenge to potentially shut down what has been the most persistent obstacle to the merger closing.

PSKY has lost 41.47% of its value over the past year, with a 12-month low of $7.62 and a high of $20.86. The stock’s 50-day moving average sits at $9.62, while the 200-day average is $10.14.

Institutional Money Still Moving In

Despite the stock’s rough run, institutional investors are not walking away. Wellington Management Group picked up a new stake in Q2, buying 327,700 PSKY shares valued at around $3.23 million.

Other firms also added to their positions. Pittenger and Anderson grew its holdings by 18% in Q1. Huntington National Bank more than doubled its position in Q4, up 108.2%. In total, hedge funds and institutional investors now own 73% of the company’s outstanding stock.

Earnings Beat, But Analysts Stay Cautious

Paramount’s most recent quarterly results gave investors something to work with. The company reported Q2 EPS of $0.18, beating the $0.15 analyst estimate by $0.03. Revenue came in at $6.91 billion for the quarter.

The company also declared a quarterly dividend of $0.05 per share, payable October 1st to holders of record as of September 15th. That represents a 2% annualized yield, with a payout ratio of 68.97%.

Analysts for the most part are not rushing to upgrade. Benchmark has a Buy but dropped its target from $19 to $16. UBS kept a Sell and cut its target from $10 to $8. TD Cowen also cut its target from $13 to $8 while maintaining a Hold. Arete Research reiterated a Sell with a $2.00 price target. The consensus sits at “Reduce” with an average target of $11.38. Research analysts expect full-year EPS of $0.56 for the current fiscal year.

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