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Is Paramount Skydance a Buy Post-Merger, Short Squeeze?
Written by Leo Miller. Published 8/24/2025.
Key Points
- Paramount Skydance got off to a hot start in its first week of trading, with many believing the stock was the subject of a short squeeze.
- David Ellison is the new Chief Executive Officer, with backing from one of the richest people in the world; his father.
- Is it time to buy into the company's ambitious vision?
Since trading under its new name on August 7, shares of Paramount Skydance (NASDAQ: PSKY) have rallied sharply—up 15% as of the close on August 18. The newly combined company aims to reinvent the traditional media powerhouse with a tech-driven strategy.
Yet there's a caveat: every Wall Street price target tracked by MarketBeat suggests shares are overvalued, even as Paramount Skydance makes bold moves to reshape the entertainment landscape.
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Below, we examine whether now is the right time to consider an investment in Paramount Skydance.
The Merger That Created Paramount Skydance
On August 7, Paramount—owner of CBS and the Paramount+ streaming service—closed its merger with Skydance Media, a production company founded by David Ellison. Skydance is known for hits such as True Grit and Top Gun: Maverick. David Ellison, son of Oracle (NYSE: ORCL) co-founder Larry Ellison, will lead the combined firm.
The strategy is to pair Paramount's deep content library with the Ellison family's technology expertise and capital. In Q2 2025, Paramount's revenue declined more than 12% versus Q2 2022.
Ellison envisions making Paramount Skydance "the world's most technologically capable media company." He plans to leverage artificial intelligence for more efficient content creation and unify the company's cloud infrastructure to enhance delivery.
Big Bet on UFC to Drive Subscriber Growth
Expanding content offerings is central to the plan. Paramount Skydance recently secured exclusive rights to UFC events for the next seven years—at $1.1 billion annually, double ESPN's prior $550 million per year deal. Shares dipped about 4% on August 11 following the announcement amid concerns over the heavy price tag.
While the annual cost is steep, the goal is to bolster Paramount+ subscriptions. With UFC's estimated 100 million global fans, the deal could justify higher subscription fees and widen the platform's appeal.
Short Squeeze Sends PSKY Soaring
On August 13, PSKY surged nearly 36% at the close (up as much as 58% intraday). With only about 30% of shares in the float, a classic short squeeze—retail traders buying shares and forcing shorts to cover—drove the spike. There was no major news that day, but the high short interest amplified the move.
Since then, shares have retreated to $13.50 (August 18 close), still well above MarketBeat's $10.50 consensus target (implying 22% downside) and above the most optimistic Wall Street forecast of $13 from Guggenheim (3.7% downside).
Elevated Valuation and the Importance of Q3 Guidance
Over the past 12 months, Paramount generated $507 million in free cash flow (FCF) and has an enterprise value (EV) of roughly $24.5 billion, yielding an EV/FCF ratio near 48x. By comparison, Walt Disney (NYSE: DIS) trades around 22x, and Warner Bros. Discovery (NASDAQ: WBD) around 14x.
That premium valuation partly reflects the financial backing of Larry Ellison, whose net worth approaches $300 billion. Still, with the stock trading above all Wall Street targets, investors may want to await Q3 earnings—expected in late October or early November—for updated guidance and a clearer roadmap before committing capital.
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