Paramount Global stock (NASDAQ
NDAQ
: PARA) has had a tough year, declining by about 21% year-to-date, underperforming the S&P 500 which has risen by about 13% over the same period. The stock also remains down by over 36% in the last 12 months. The markets have been penalizing Paramount
PARA
for some time now, considering its mounting investments into streaming operations and the company’s decision to cut its quarterly dividend from $0.24 to $0.05 per share earlier this year. Moreover, the linear TV advertising market has faced headwinds as high inflation and softening consumer spending have caused marketers to pare back on ad spending, and this, too, has impacted Paramount. Although Paramount’s Q2 2023 results were a bit better than expected, revenue still declined by about 2% year-over-year to $7.62 billion, while adjusted earnings came in at $0.10 per share. The recent settlement between The Walt Disney
DIS
Company and Charter – which will involve Disney removing smaller, underperforming channels from cable bundles while adding streaming offerings – is also likely to have broader repercussions for the TV industry, and this could also be weighing on Paramount stock, given its exposure to the legacy TV space.
Interestingly, Paramount stock has a Sharpe Ratio of -0.3 since early 2017, lower than 0.6 for the S&P 500 Index over the same period. This compares with the Sharpe of 1.3 for the Trefis Reinforced Value portfolio. Sharpe is a measure of return per unit of risk, and high-performance portfolios can provide the best of both worlds.
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