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Paramount (NASDAQ:PARA) (NASDAQ:PARAA) shares closed down more than 5% on Thursday after Redburn Atlantic downgraded the media company due to ongoing worries over linear advertising.
“Linear advertising is at a negative tipping point and consensus does not adequately forecast declines across the group,” analyst Hamilton Faber wrote in a note to investors. Faber lowered his rating on Paramount to sell.
Paramount is the most impacted (Faber also lowered his rating on Warner Bros. Discovery (WBD)) as its low margins as any changes in advertising have a “very meaningful impact on total company EBITDA,” Faber said. He forecasts 10% downside to EBITDA estimates over the next three years and 21% downside to earnings per share estimates.
Warner Bros. Discovery is expected to see a 8% impact to EBITDA.
Any benefits from acquisitions, something that has been speculated upon recently, would also likely be limited, Faber said. He also said that any improvement in sports advertising (which may not happen, based on recent disclosures from Walt Disney (DIS)) would not likely be enough to aid the companies.