Almost everyone is familiar with the movie company Paramount. What you might not be familiar with is that the company was actually reorganized as recently as December of 2019. Clearly, they’re one of the most dominant entertainment companies in the industry but the bigger question is, are they a good long-term investment for your stock portfolio? You might automatically think that any company that’s been around as long as Paramount is capable of being one of the best long-term investment options that you could ever decide to get involved with. However, it would be a mistake to automatically make assumptions with this stock just like it would be a mistake to make assumptions with any stock. If you really want to know whether or not this is a good option for you in the long term, then there are several factors that you have to look at. All of those key factors will be examined more closely in the following paragraphs.
The Stock at a Glance
If you look at the stock in today’s trading, you’ll notice that it’s up by 1.88% and that each share of stock is selling for a price of $36.78. As of last year, they had 22,965 employees and in 2020, their revenue was listed at $25.29 billion. As previously mentioned, they underwent an official restructuring as of December 4th, 2019. While it’s almost impossible to differentiate the company before and after this change, at least for people who are on the outside looking in, it does make a difference when you’re talking about investing in the stock. Therefore, it’s important not to overlook it. Today, the company is actually owned by National Amusements as opposed to being a stand-alone corporation. As a direct result of this change in business practices, you have to be able to figure out what type of an impact that’s going to have on this particular stock’s value as a long-term investment.
Predictions About the Stock
More often than not, people that want to know if they should think about investing in a stock in the long term get advice from stock market analysts. Typically, there is some type of general consensus that can provide at least a reasonable level of guidance when it comes to deciding how a person should move forward with these types of situations. Here, it seems to be more complicated. At first glance, you’ll notice that three major stock market analysts have made three very different predictions for how they think the stock will perform over the course of the next six to nine months. As a matter of fact, one of these analysts basically predicts that the stock won’t do much of anything at all, neither going up nor down by any significant amount. If that is indeed the case, then you would end up being forced to hold onto the stock until it goes up because it simply wouldn’t make any sense to purchase shares of the stock at today’s prices and then turn around and sell it less than a year down the road for basically the same price.
Typically, the only time that someone would do that is when they feel like a stock is about to tank and they’re trying to break even. If you look at the predictions of two other stock market analysts, the situation doesn’t become any more clear. That’s because one of them thinks that the stock will easily become worth more than $42 a share and the other believes that the stock will dramatically decrease in value, by perhaps as much as $8 to $10 per share. When you look at all of these different analyses and you see that they are all vastly different, it doesn’t exactly leave you a lot of wiggle room to figure out what you should do. Therefore, the only thing that you can do is continue to investigate and find out as much information as you possibly can before you make a decision.
A Closer Look at the Numbers
When you take a closer look at the numbers, things still remain about as clear as mud. Top stock market analysts can’t seem to agree on what anyone should do with this stock, even in the immediate future. That definitely makes things more cloudy if you’re thinking about purchasing it as a long-term investment option. If you want to crunch some numbers, some stock market analysts believe that this is a strong candidate for a long-term investment because they think the stock will continue to go up by more than 36% over the course of the next year. Others aren’t so sure. As a matter of fact, they believe that the stock will decline by as much as 20%. This definitely makes it difficult to get any type of clear picture regarding the stock and that’s before you complicate things even further. Some stock market analysts believe that anyone who has already purchased shares of the stock should simply hold on to them and hope for better days ahead. If you’re looking for a majority here, it’s going to be difficult to find one.
As previously mentioned, stock market analysts seem to be deeply divided about this particular stock, especially with regard to how they believe it will behave within the next 12 months. As a matter of fact, the overwhelming majority of them can’t agree on how they think it will behave over the course of the next six months, much less a year in advance. In reality, the only consensus you’re likely to find comes in the form of those who agree that if you’ve already purchased shares of the stock, you should simply hold on to them. For those who haven’t done so and are looking for advice on what they do, there is not a lot of middle ground, nor is there much in the way of finding a majority. That means that you’re going to have to do some intense investigation and make some difficult decisions on your own.
Checking All the Boxes
If this particular stock is not a good candidate for a long-term investment option, then you have to ask yourself why. Unfortunately, it’s not exactly easy to find the answers. When you look at all of the information, everything looks good, especially when compared to a lot of the other stocks that are available these days. If you look up information regarding the stock’s return on equity, it’s predicted to go up, as is its return on assets. The company’s revenue forecast is also predicted to go up. Perhaps the first indicator that things may not be as rosy as they seem comes in the form of the company’s earnings per share forecast. If you look at the numbers between now and January of 2023, those numbers are predicted to go up steadily. However, they’re also predicted to plateau after that and remain largely unchanged for anywhere from 12 to 36 months. If you’re looking at potentially buying the stock as a long-term investment, that could be a potential problem because it means that you may not be getting the return on your investment that you were hoping for.
Why Should You Hold?
As previously mentioned, most stock market analysts believe that you should hold if you’ve already purchased the stock. Obviously, that also means that they’re not terribly excited about the prospect of anyone purchasing several shares of stock as a long-term investment at this particular point in time. The question is, why? As it turns out, a lot of it has to do with their fourth quarter earnings, which didn’t exactly inspire a great deal of confidence among the most stock market analysts As a matter of fact, those 4th quarter earnings were more than 39% lower than what a lot of analysts had predicted back when the company stopped being a part of CBS Viacom and became a part of National Amusement. Granted, the earnings weren’t terribly dire. As a matter of fact, they showed a profit of slightly more than 6%. Nevertheless, the results were considered to be fairly weak for stock market analysts who had expected the company to perform much stronger than it actually did. Does that mean that there is trouble on the horizon, or was this merely a one-time issue that is no different than the types of things every other company experiences?
It seems that part of the issue is directly related to the fact that National Amusement has had some trouble deciding exactly how they want to handle their new charge. This has become public knowledge in the form of some press releases that announced that Paramount Studios might not be in the movie making business in the same way as they had been in the past and that got a lot of investors raising their eyebrows. Whether or not there was any truth to these claims is still debatable, but it was enough to make people who had already invested in the stock decide it was time to sell their shares. Of course, that meant that stock market analysts no longer had a great deal of confidence in the stock as far as its ability to perform in the long-term is concerned. As you can see, there’s a lot of debate on how well the stock is predicted to perform in the short-term. If analysts can’t even agree on that, then they’re certainly not going to be able to agree on whether or not it will be a solid performer when it comes to a long-term investment. Unfortunately, much of it is rooted in what the new parent company decides to do and that’s something that still remains largely unknown.
What This Means for the Potential Investor
Now that you’ve examined all of the data, you still have to decide what it all means for you, the potential investor. Is there a chance that the stock market analysts could be wrong and this particular stock could end up performing far better than anyone thinks that it is capable of performing? Of course, the answer is yes. The stock market can be fickle and that makes it extremely difficult to predict with a high level of accuracy, even when someone very skilled is looking at the numbers. That said, the individuals who analyze these stocks spend almost all of their time doing so and they’ve learned to spot patterns that other people might miss. When you have an overwhelming number of individuals telling you that you should hold the stock if you already have it, that’s a fairly good indicator that you probably shouldn’t invest in it if you haven’t done so already.
It certainly doesn’t mean that the stock is going to tank or that the company is simply going to fall off the face of the Earth, but remember, you’re considering this stock as a long-term investment because you want to make money, not lose it. Currently, there are other stocks that are capable of performing better. There are certainly other stocks that are predicted to outperform this one over the course of the next one to three years. As a result, it doesn’t really make a lot of sense to insist on purchasing this stock as a long-term investment when there are other options that could potentially do much better. If you really want to invest in the stock for one reason or another, it would probably be wise to simply keep it on your radar and see how it performs over the course of the next six months, with the intention of re-evaluating things at that time. At the moment, it doesn’t make a lot of sense to spend more than $36 on each share when there is such a little certainty that it will actually be something that you can sell for significantly more later on down the road.