Paramount slips as Morgan Stanley downgrades, citing 'uncertain' path towards growth
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Paramount Global (NASDAQ:PARA) (NASDAQ:PARAA) shares slipped on Monday as investment firm Morgan Stanley downgraded the media and entertainment giant, noting the fact it trades at a premium to its peers despite the fact it has a "more uncertain path towards long-term EBITDA and [free cash flow] growth."
Analyst Benjamin Swinburne lowered his rating on Paramount Global (PARA) (PARAA) shares to underweight and lowered his price target to $22 from $32, noting that estimated 2023 earnings are expected to decline, citing rising investments in streaming. However, the company's "outsized" exposure to linear advertising and cord cutting poses additional risks.
"Paramount is not unique in facing macro headwinds, but it carries above-peer-average exposure to linear pay-TV revenues under rising pressure and it has 2024 streaming guidance that we believe is at risk," Swinburne wrote in a note to clients. 
Paramount Global (PARA) (PARAA) shares fell nearly 2% to $24.56 in premarket trading.
Delving deeper, Swinburne noted that the early stage of Paramount Global (PARA) (PARAA) pivot towards streaming is likely to cut EBITDA and free cash flow into next year. Coupled with the potential for a more cautious consumer and advertiser, it's likely that Paramount Global (PARA) (PARAA) does not hit streaming guidance in 2024.
The analyst also noted that distribution revenues for the linear TV business are likely to decline year-over-year for the first time in the second-quarter, driven by cord cutting and Paramount's (PARA) (PARAA) "more modest pricing power than other network groups."
Swinburne also noted the impact that Apple (AAPL), Amazon (AMZN) and Netflix (NFLX) may have as the trio increase their sports rights. Apple (AAPL) recently added Major League Baseball and is seen as the "most likely" winner of the NFL Sunday Ticket package, which could cost as much as $3B per year.
Conversely, Amazon (AMZN) is now the sole carrier of Thursday Night Football and Netflix (NFLX) has several sports-related series, including one about Formula One.
Earlier this month, investment firm Rosenblatt cut its price target on Paramount Global (PARA)(PARAA), noting the "choppy" ad market. 
Analysts have been cautious on Paramount (PARA). It had an average rating of HOLD from Seeking Alpha authors, while Wall Street analysts are more positive on it and still rate it a BUY. Conversely, Seeking Alpha's quant system, which consistently beats the market, rates PARA a HOLD.