Skydance Stock Is Risky. Here’s What Could Power a Rally Anyway.

Skydance stock has fallen nearly 18% since Oct. 6, when it completed its acquisition of Warner Bros. Discovery. (Getty Images)

Key Points

Citi resumes coverage of Skydance stock with a Buy rating and a $10 price target, saying Wall Street is too skeptical of the company.
Citi analyst Jason Bazinet projects Skydance’s Ebitda will rise to $19.4 billion in 2029 from $12.5 billion in 2026.
Citi forecasts $8 billion in net synergies for Skydance by 2029, which is $2 billion higher than management’s guidance of $6 billion.

Skydance’s ambitions might be running ahead of reality, but the many risks haven’t scared off Citi.

The firm resumed coverage of Skydance stock on Monday with a Buy rating and $10 price target. Analyst Jason Bazinet says Wall Street has gotten too skeptical of Skydance and underestimates just how much profit the newly combined company can unlock.

Skydance stock fell 2.3% to $7.59 on Monday. As of the close of trading Friday, shares have fallen about 18% since Oct. 6, when Paramount Skydance officially completed its merger with Warner Bros, according to Dow Jones Market Data.

Wall Street is generally cautious so far. Of the 27 analysts covering Skydance stock, 12 have a Hold rating and nine recommend selling shares, according to FactSet data. Only six recommend buying the stock.

After all, Skydance is saddled with high debt, integration challenges, and aggressive financial targets after the $110 billion deal, as Barron’s has previously reported. Not to mention, traditional television faces severe headwinds, a critical vulnerability for a business relying on TV for over 60% of its profit.

Beyond the benefits of Skydance’s massive scale, Bazinet’s bullish call primarily rests on cost synergies, not organic growth.

The analyst projects Skydance’s earnings before interest, taxes, depreciation, and amortization to rise to $19.4 billion in 2029 from $12.5 billion in 2026. That estimate sits nearly 12% above the more skeptical Wall Street consensus, he wrote.

All of this growth, however, essentially comes down to cutting costs and integrating operations. Citi forecasts $8 billion in net synergies from 2026 through 2029, which is $2 billion higher than management’s own guidance of $6 billion.

Bazinet justifies his higher synergy target by pointing to management’s prior record: During the initial Paramount deal, management promised $2 billion in synergies and over-delivered with $3 billion.

While Bazinet cautions that fully pivoting from linear TV to streaming will take significant time, squeezing out operational synergies is what will keep the balance sheet and earnings resilient while that transition plays out. Skydance already has a major streaming arsenal in Paramount+ and HBO Max, with plans to eventually unify them into a single platform on par with Disney.

If management executes on these cuts, like merging the tech behind HBO Max and Paramount+, as aggressively as Bazinet expects, the resulting burst of cash could drive the share price higher—before the continuing decline of cable TV catches up with Skydance.

Write to Mariapaula Gonzalez at mariapaula.gonzalez@barrons.com

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