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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 its August 7 debut as Paramount Skydance (NASDAQ: PSKY), shares have surged 15% through the August 18 close. The merged firm aims to reinvent the legacy media giant with a tech-first strategy.
Yet every Wall Street price target tracked by MarketBeat suggests shares are overvalued, even as the company makes bold moves to shake up the entertainment landscape.
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Below, we explore whether Paramount Skydance merits investment now.
The Merger That Created Paramount Skydance
On August 7, Paramount—the owner of CBS and the Paramount+ streaming service—completed its merger with Skydance Media. Skydance is behind hits such as True Grit and Top Gun: Maverick. David Ellison, son of Oracle (NYSE: ORCL) co-founder Larry Ellison, will lead the combined company.
The strategy is to leverage Paramount's extensive content library alongside the Ellison family's technological prowess and deep pockets to revive the media giant. It's timely: Paramount's revenue in Q2 2025 was down more than 12% from Q2 2022.
Ellison aims to make Paramount Skydance "the world's most technologically capable media company." He plans to embrace artificial intelligence for more efficient content creation and unify the company's cloud infrastructure to speed up delivery.
Paramount Ponies Up for UFC as Part of Long-Term Strategy
Adding fresh content is key to the plan. Paramount Skydance recently secured exclusive Ultimate Fighting Championship (UFC) rights for the next seven years. Shares dipped about 4% on August 11 after the company agreed to pay $1.1 billion annually—double the $550 million per year ESPN paid previously.
This hefty price tag raises questions about recouping the investment. However, the primary goal is to attract more Paramount+ subscribers.
Securing an asset with an estimated 100 million fans not only boosts subscriber appeal but also provides leverage for future price increases.
PSKY Surges on Probable Short Squeeze, Leaves Stock Above Targets
On August 13, PSKY shares jumped nearly 36%, peaking at a 58% intraday gain. The spike appears to have been driven by a short squeeze: retail traders buying shares forced short sellers to cover. No material news was released that day, though the stock carried significant short interest.
Only about 30% of PSKY's shares float freely, amplifying both the risk and potential magnitude of a squeeze.
Despite retreating to $13.50 on August 18, PSKY remains well above the MarketBeat consensus target of $10.50, implying 22% downside. Even the most optimistic forecast—from Guggenheim at $13—suggests 3.7% downside.
Valuation Appears Rich; Q3 Updates Will Be Key
Over the past 12 months, Paramount generated $507 million in free cash flow (FCF) against an enterprise value (EV) of roughly $24.5 billion. EV, which accounts for both equity and debt, is useful for comparing companies with varying debt loads.
That results in an EV/FCF multiple of about 48x, versus roughly 22x for Walt Disney (NYSE: DIS) and 14x for Warner Bros. Discovery (NASDAQ: WBD).
On the surface, PSKY trades at a steep premium to its peers, though the implicit backing of Larry Ellison—whose net worth approaches nearly $300 billion—offers a notable margin of safety.
Given these metrics—and PSKY trading above all Wall Street targets—investors may want to hold off. The combined company expects to share a business update and financial outlook with its Q3 earnings release, likely in late October or early November. It may be prudent to await those forecasts and further clarity on strategy before considering an investment.
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