Skydance’s arrival on the New York Stock Exchange has delivered two consecutive down sessions, with shares closing Wednesday at $8.98, a decline of 6.8%, after also slipping Tuesday.
The rocky start came as investors began assessing the newly merged company following the completion of the Paramount and Warner Bros. Discovery combination. Skydance also secured a favorable legal settlement with Attorneys General who had attempted to block the deal.
Even with those hurdles cleared, Wall Street’s attention has quickly shifted to whether management can deliver on its financial and strategic promises.
“It’s a show me story,” Citizens analyst Matthew Condon said.
Debt and execution dominate investor concerns
Skydance carries $80 billion in debt, leaving investors focused on its high leverage and its ability to reduce that burden while continuing to invest in content. Chairman and CEO David Ellison and co-chief executive Ynon Kreiz said at a Tuesday press conference that the company remains committed to dramatically lowering leverage by 2028.
The executives also maintained that Skydance can pursue savings and spending at the same time. Management has targeted $3 billion in net synergies by the end of 2027 and $6 billion by the end of 2028.
That plan is central to the investment case, but analysts are watching closely for signs that the company can integrate its operations without weakening its core businesses.
Condon is more optimistic than some of his peers. He has a “market overperform” rating on Skydance and a $14 price target. With the stock trading below that level, he said its “risk/reward” appears favorable.
He pointed to the combined company’s intellectual property, sports rights, $30 billion content budget and plans for 30 films annually as potential strengths. Those assets could provide a consistent pipeline for streaming and help Skydance pursue what Condon described as a “must-have streaming platform.”
Interest is particularly high around the combination of HBO Max and Paramount+, although questions remain about the structure, strategy and pricing of the streaming operation.
Condon also acknowledged that the debt-reduction framework depends in significant part on the underlying businesses continuing to perform broadly in line with their trajectories before the transaction. That makes execution especially important.
Analysts warn of merger risks
Rich Greenfield raised the question of whether Skydance can accomplish what management has promised, citing the challenge Warner Bros. Discovery faced as its legacy cable programming operations deteriorated faster than savings could be realized.
“And so that’s going to be the real challenge facing David Ellison and Ynon Kreiz,” Greenfield said on CNBC.
TD Cowen analyst Doug Creutz, who has a “hold” recommendation on the stock, also remains cautious. He said the company and its leadership must avoid the integration and execution difficulties that have affected other major media mergers.
Seaport Research’s David Joyce offered another guarded assessment. While management continues to express confidence, Joyce said he wants to see how the savings plan develops.
“We remain guarded on the ability for management to reach its $3B net synergies goal by YE27 and $6B by YE28,” Joyce wrote in a note. He added that reaching the target would be “quite impressive,” with $6 billion representing 11% of pro forma expenses, though he said the goal was not beyond the realm of possibility.
The company has projected that cash will increase in the coming years, but its near-term room for setbacks is limited. Risks include higher streaming churn, faster declines at cable networks, another box-office slowdown and broader macroeconomic or geopolitical disruption.
Skydance also cannot issue additional debt following Paramount’s large bond sale to finance the merger. The company has the backing of the Ellison family and could potentially seek new equity investors.
One Wall Street observer expects a secondary stock offering at some point, noting that groups involved in financing the transaction — including the Ellisons — may eventually want to sell shares. The prospect of more stock reaching the market could give some investors another reason to wait.
What Happens Next?
Skydance now faces pressure to launch its streaming strategy, demonstrate that its promised synergies are taking shape, show cohesion across management and present a convincing case to investors.
Wall Street’s next formal look at the merged company will come when Skydance reports third-quarter earnings. That update will offer management an opportunity to provide greater clarity on integration, leverage reduction, streaming and the path toward its 2027 and 2028 savings targets.