Paramount (PARA) shares fell after Bank of America (BAC) downgraded the stock to "Underperform" from "Buy." DISH Network (DISH) reported third-quarter earnings and wireless subscriber figures far below estimates, causing shares to have their worst day in 23 years. Trading of WeWork (WE) shares has been halted as the former high-flying startup is expected to file for bankruptcy after its value plunged from $50 billion.
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Video Transcript
- Paramount stock falling today, that's after getting hit with a downgrade from Bank of America analyst Jessica Reif Ehrlich, slashing her rating to underperform from buy and cut her price target to $9 a share from $32. So this one, Paramount here, this is the rare double downgrade, Akiko. You don't--
AKIKO FUJITA: It's a steep cut.
- This is a steep cut. you don't see that very often. I like it when they come out. They take big swings. So the analyst goes from buy to underperform, so the equivalent of a sell. slashes the target to $9. It sounds like what she was counting on was asset sales here, right? And that just isn't happening. She says there have been credible bids for certain assets like BET, like Showtime, but it doesn't look like any significant asset sales are on the horizon.
And here, I think, is her money quote to her clients. She says, our concern is the longer it takes to execute potential asset sales, the less value they could ultimately garner. So she is off, sell.
AKIKO FUJITA: Essentially saying there's no real upside to shares if you don't sell and you're hanging on to it. I mean, that kind of is what it comes down to. I think you're right on that key quote there saying that there are opportunities here. There have been some rumors about those swooping in to buy a Showtime or a BET, but Paramount hasn't necessarily gone after that. So her concern is the longer you wait, the value comes down as well. Which is why we've seen a decline in Paramount shares today on the back of this double downgrade.
Well, DISH shares plummeting today after the company reported third quarter results revenue and wireless customer numbers were both much lower than expected, causing the stock to have its worst day in 23 years. The backdrop, of course, against this, all of this, Josh, is that Dish is a company that is really in transition.
Not unlike some of its competitors, they've lost subscribers to viewers who have moved over to streaming. They have doubled down on the wireless side of things, right, aggressively buying up Spectrum, betting on 5G. That very one that they bet on did not come through, at least, in the quarter. Dish lost nearly five times as many mobile customers. We're talking about a decline of 225,000 when the Street was expecting 46,000.
- Yeah. I'm looking through. I'm trying to find anything positive on the street. There really isn't much. In terms of the financial analysts who covered, his name Moffett Nathanson calls the report astonishingly bad, in their words, they say likely Dish enters bankruptcy sometime in the next few years. And this report confirms they see that projection. They're neutral with a target of $5. Citi's also neutral, saying the results are underwhelming. Their target $6. The majority of analysts covering the company now, it looks like about 61% here, have a hold on the name at this point.
AKIKO FUJITA: And underlying all of this is their debt, right? $20 billion is what we're talking about right now. And as we've said over and over on the show, it's not just about $20 billion where when you think about where rates are right now, those borrowing costs are going up even further. They don't have that additional revenue driver that they thought they would have also points to the challenges of really trying to pivot to wireless. It's a tough business.
- Yeah, not easy and they're getting hammered today on it. Finally here, let's check out shares of WeWork. They have been halted most of the day now as Wall Street prepares for a bankruptcy filing. So this, we're still waiting for the news here, Akiko. It's been halted for a while now. Listen, the company, we saw the reports and the headlines, we expected to file for bankruptcy. It is a remarkable story. I mean, it is a former darling of Silicon Valley, venture investors of Wall Street. It was once valued, Akiko, at nearly $50 billion at one point. Office space from London to Manhattan. I mean, millions of square feet. But now going bust, it looks like.
AKIKO FUJITA: Yeah, the thing that I keep repeating is, though, as this expectation of WeWork filing for chapter 11, for all the talk about the challenges, the hype that was brought up through Adam Neumann. It really was the real estate market that kind of did the company in, right? When you think about WeWork at its peak, there were still warnings out there, even as VCs were throwing money into it, saying this is really a real estate company. And when that market turns the company is going to face its struggles. And here we are talking about the very issue.
The company announced plans to renegotiate all of their leases back in September. At the time they said their lease liabilities accounted for more than two-thirds of its operating expenses. They've already missed interest payment. That was key there. That sort of gets the clock ticking for a potential default 30 days from now.
- Yeah, COVID-19, remote work, higher rates, it was just too much of a challenge for the company with the shared office space, right? So I mean, if we see the filing, the bankruptcy, I think shareholders likely get wiped out. Creditors hope to recover something, right?
AKIKO FUJITA: Yeah Adam Neumann also weighing in, right? Yeah kind of mentioning-- although he's not necessarily involved with the company anymore. So we're going to continue to watch that.
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November 07, 2023 at 04:43AM
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