Paramount stock plunges on earnings miss, slash to quarterly cash dividend

The Yahoo Finance Live team discusses the sharp decline in Paramount Global stock after its disappointing Q1 earnings report.

Video transcript

- And my play is pretty much the exact opposite. Paramount Global. Shares plummeting today, off 26% after the company missed earnings expectations and slashed its quarterly cash dividend to just $0.05 a share, down from the previous $0.24. Streaming losses also continue to accelerate, with the media giant reporting a direct-to-consumer loss of $511 million versus the prior year period's $456 million.

And if that wasn't enough, advertising revenue sank double digits within its TV media division, falling 11% year over year. Management does expect the ad market to improve in the back half of 2023, while subscription growth remained a bright spot in the quarter, with Paramount Plus subscribers hitting 60 million globally. Now, guys, a lot of these issues, particularly surrounding advertising weakness and those widening streaming losses, they're being felt across the industry. But Paramount still has a long way to go before it can reach that guidance of earnings growth and positive free cash flow in 2024.

- Yeah. Certainly. And Allie, when you take a look at these results that we just got from Paramount, you're going to think that timeline is just going to be extended. There was a couple of analysts here weighing in, one from Wells Fargo, the team there saying that it is a sign of a risk here to estimates. Obviously, no surprise. That's the general consensus at this point when you do see a cut to the dividend.

But also going on to say that that initial expectation-- I believe, what, it was the end of right around 2024 is when they were hoping to get positive free cash flow-- that that is likely going to take a lot more time. We've seen this shift to direct to consumer be much more challenging and take a longer time than maybe a lot of these companies had initially anticipated.

Paramount, clearly, one of the names that's struggling in this environment with a weakening ad background. The ad market continuing to take longer to recover as well. We heard some positive momentum from some of the tech players earlier in the week or over the last week or two just about some of the recovery that we're seeing there. But it seems for the media plays, it's going to take an even longer time, Akiko.

- Yeah. It's the weakening ad environment. But also, Paramount one of those companies that's sort of shifting the old and the new. And they're trying to find that right balance right. If you think about their TV revenue, or their traditional TV revenue, that dropped about 8% at the same time, as Allie just mentioned, they're still dealing with losses on the streaming side. They're trying to stop the losses by 2024. But it really is a very tricky, tricky dance they're trying to do there. Traditional TV, obviously, declining. But streaming not necessarily the most profitable, at least yet.