SKYD Stock Gets JPMorgan Upgrade: Analyst Sees Skydance Gaining Ground On Netflix, Disney With Warner Bros. Deal

JPMorgan said the acquisition presents Skydance with opportunities to improve content monetization and reduce costs.

• JPMorgan resumed coverage of Skydance on Friday, upgrading the stock to ‘Neutral’ from ‘Underweight’.
• It lowered its price target to $9, down from $14, in line with the Wall Street average.
• Wall Street largely remains cautious on SKYD stock with nine of the 23 analysts that cover the stock giving it a ‘Sell’ or ‘Strong Sell’ rating and 10 recommending ‘Hold’.

Skydance (SKYD) shares were little changed in midday trade on Friday after JPMorgan upgraded the stock, citing that its Warner Bros. Discovery acquisition creates a media company larger by revenue than Netflix (NFLX) and Disney (DIS) excluding theme parks.

In a note to investors cited by TheFly, JPMorgan resumed coverage of Skydance, upgrading it to ‘Neutral’ from ‘Underweight’. However, the firm lowered its price target to $9, down from $14, leaving a potential upside of almost 15% from current levels.

SKYD stock edged around 0.5% lower in midday trade. On Stocktwits, retail sentiment around the shares improved to ‘bullish’ from ‘neutral’ territory over the past day.

JPMorgan Sees Streaming, Cost-Saving Opportunities From Warner Deal 

JPMorgan said Skydance’s scale creates opportunities to improve content monetization, cross-sell its streaming services and remove duplicated costs.

After the acquisition, Skydance now owns Paramount and Warner Bros., HBO, CBS and CNN, along with the Paramount+ and HBO Max streaming services. Management says the company generates nearly $70 billion in annual revenue.

JPMorgan’s assessment echoes priorities outlined by Skydance’s co-CEOs in a CNBC interview earlier this month. Chairman and CEO David Ellison said the company plans to combine its two streaming services, which he expects would give the business more than 200 million subscribers.

Ellison also identified five priorities for the combined company, including mid-single-digit revenue growth, integrating the streaming platforms, expanding the studio and direct-to-consumer businesses, and upgrading the company’s technology and operating platforms.

Co-CEO Ynon Kreiz said Skydance expects to realize about one-third of its $6 billion synergy target in the first year. He added that labor costs would not account for most of the anticipated savings. “We have a clear vision and line of sight to achieve the savings we’re aiming towards,” he said.

Wall Street Remains Cautious On SKYD Stock

JPMorgan’s $9 target is in line with Wall Street’s 12-month average target as per Koyfin data. However, ratings suggest that more analysts are cautious than bullish on SKYD stock. Only four out of the 23 analysts covering the stock give it a ‘Buy’ or ‘Strong Buy’ rating, with 10 recommending ‘Hold’ and 9 recommending ‘Sell’ or ‘Strong Sell’.

Other firms have also taken a cautious view of the company’s prospects since the merger closed. Bernstein SocGen cut its price target to $6 from $12 last week while maintaining an ‘Underperform’ rating. The firm said Skydance was “very much a show me story with considerable execution risk in the years ahead.”

Meanwhile, Morningstar lowered its fair value estimate to $12 from $15 after about 471 million warrants began trading. Barclays has an ‘Underweight’ rating and a $7 target.

Investors are also assessing the capital behind the transaction and the company’s financial outlook. The Ellison family reportedly contributed about $17 billion toward financing the deal, purchasing an estimated 1.4 billion shares at $12 apiece. Semafor reported Thursday that Elon Musk invested about $1 billion in Skydance. 

Meanwhile, media mogul John Malone said Wednesday that he expects Musk’s SpaceX (SPCX) to invest $8 billion to $10 billion in the company. 

Skydance is scheduled to report its first earnings since the acquisition on November 9. Wall Street is expecting earnings per share (EPS) of $0.19 on revenue of around $7 billion.

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