Paramount stock jumps on Bank of America upgrade citing 'significant buyer interest'

Paramount Global's (PARA) stock closed up more than 3% on Tuesday following an upgrade from Bank of America based on a potential sale of all or part of the company.

Bank of America analyst Jessica Reif Ehrlich upgraded shares to Buy from Neutral, in addition to raising her price target to $32 a share — up from the prior $24.

The analyst cited potential upside if Paramount were to sell all or parts of its business, writing in a new note on Tuesday: "It is our view that PARA has a unique collection of assets that would generate significant buyer interest if ever put up for sale-either in pieces or whole."

Paramount shares had gained as much as 8% earlier in Tuesday's session.

Ehrlich called out recent reports around a potential sale of the company's BET Media Group, which includes cable channels BET and VH1, after producer Tyler Perry and media mogul Byron Allen reportedly expressed interest in purchasing a majority stake.

Paramount also turned down a $3 billion-plus offer for Showtime from former executive David Nevins, according to The Wall Street Journal.

"We believe these press reports validate our thesis," she said. "We think other assets such as Nickelodeon, Paramount Studios and CBS Networks could also be in high demand given their strategic value, and it is not difficult for us to contemplate a scenario where the sum of the various assets is worth more than PARA's consolidated [enterprise value]." She was referring to a common measure of the company's total value.

Paramount CFO Naveen Chopra weighed in on the sales rumors in an interview with Yahoo Finance Live earlier this month: "There's been speculation around BET. We don't comment on M&A speculation. ...But I will say that, in general, we are always looking at different ways to create value for our shareholders."

"To the extent that there are ways to do that — by buying assets, by selling assets, by restructuring assets — we look at all of those very carefully," he said.

Paramount has long been rumored as a potential acquisition target due to its small size relative to competitors. The media giant boasts a current market cap of just about $14 billion, which pales in comparison to Disney's (DIS) $173 billion and Netflix's (NFLX) $144 billion.

"Consolidation has been the rule in business for a long time, certainly been the rule in media," Paramount CEO Bob Bakish revealed during a UBS media conference late last year. "So, it's hard for me to bet on anything other than consolidation [happening] in the future." 

Paramount, which recently announced it will be merging its Paramount+ and Showtime streaming services into one offering dubbed "Paramount+ with Showtime," has eyed greater integration between its cable television and streaming offerings amid escalating cord-cutting trends and direct-to-consumer losses.

In its most recent quarter, the company reported a direct-to-consumer loss of roughly $1.82 billion in 2022 — slightly above previous guidance of $1.8 billion.

Paramount's stock is up about 25% year-to-date after falling 44% in 2022.

Alexandra is a Senior Reporter at Yahoo Finance. Follow her on Twitter @alliecanal8193 and email her at [email protected]

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