FILE PHOTO: Paramount Global and Skydance logos are seen in this illustration taken December 17, 2024. REUTERS/Dado Ruvic/Illustration/File Photo

By Rashika Singh

(Reuters) -Paramount Skydance shares rose 8% on Thursday in a vote of investor confidence for new CEO David Ellison's pitch on remaking the storied media house for the streaming era.

In its first set of results since the merger of Paramount and the production firm behind Mission: Impossible and Top Gun, the company announced job cuts and laid out plans to invest $1.5 billion in its streaming and studio divisions, with $30 billion in revenue expected by 2026.

Ellison, founder of the tech-focused Skydance Media, has been rushing to make sure Paramount Skydance is at the forefront of the "generational transformation" in media - he has secured a Timothee Chalamet-led heist film, signed "South Park" creators Matt Stone and Trey Parker to a five-year agreement and struck a deal with Activision to bring "Call of Duty" to theaters.

Paramount is also looking into taking over Warner Bros Discovery with an eye on lucrative properties like Harry Potter and DC Comics, reports have said.

Markets have rewarded the effort: the Paramount Skydance stock has gained about 30% since the merger was finalized. But analysts remain cautious about the execution of Ellison's big bets.

The company raised its savings target to at least $3 billion, and said it would shed 1,600 jobs tied to asset sales in Argentina and Chile, on top of 1,000 layoffs in October and 600 voluntary exits. Ellison also plans to unify the company's streaming platforms and ramp up theatrical output to 15 films in 2026.

CASH FLOW

MoffettNathanson analysts said the management's focus on their 'North Star' priorities - investing in growth businesses, scaling its streaming offerings and driving cost efficiencies - looked promising but cash flow risks remained.

"The near-term cash drag of these investments could constrain free cash flow generation and delay deleveraging toward investment-grade status," they said.

The stock's forward price-to-earnings ratio of 14.58 is below that of Walt Disney at 16.96 and well under streaming leader Netflix at 35.23.

"While we're encouraged by Paramount's vision, there remains a significant amount of execution across direct-to-consumer and filmed entertainment, the benefits of which may not be visible until later in 2026," J.P.Morgan analysts said.

(Reporting by Rashika Singh in Bengaluru; Editing by Devika Syamnath)