Avoid Paramount Skydance; Bill Ackman of Pershing Square is bullish; Many large-cap tech stocks are cheap right now; New study challenges that aging means decline
1) Media and entertainment company Paramount Skydance (PSKY) has "won" a bidding war against Netflix (NFLX) to acquire Warner Bros. Discovery (WBD).
I put "won" in quotes because Paramount is massively overpaying, such that it will be saddled with at least $79 billion in debt once the deal closes (likely in the third quarter). And some analysts think it could be as much as $100 billion.
There's no way the company can support such a high debt load... So I expect it to be financially crippled the day the deal closes and eventually file for bankruptcy, wiping out shareholders.
To understand why, let's take a look at both Paramount's and Warner's financials over the past two decades, starting with Paramount...
Revenue and operating income have been declining for years:
Free cash flow ("FCF") has been tepid:
And while Paramount has paid down some debt, it remains high:
Turning to Warner, the company had a surge in revenue – but a crash in profits – when it merged with Discovery in 2022. Since then, profits have recovered somewhat, while revenue has declined in the past two years:
FCF has also plunged over the past two years:
The company has been paying down the huge debt load it assumed in the 2022 merger, but it remains high:
If Paramount and Warner were simply merging, their combined net debt load of $44 billion would be high but not bankruptcy-inducing in light of their combined FCF of $3.4 billion last year.
But that's not what's happening: Paramount is buying Warner for a wildly inflated price of roughly $111 billion (including the assumption of $32.2 billion of 2025 net debt). That's for a declining asset that generated a mere $1.7 billion of operating income and $3.1 billion of FCF last year.
This deal reminds me of the saying, "Two stones tied together still sink."
New York University marketing professor Scott Galloway shares my view, calling it "the worst acquisition in history." He concludes:
There are only two ways to make money in the media business: bundling and unbundling. We're in a bundling phase. The question isn't what the Ellisons will do with Paramount and WBD, but who will acquire those assets at fire-sale prices when their AI synergy narrative can no longer provide cloud cover for their pair of overleveraged legacy media companies.
Avoid Paramount's stock at all costs.
2) Amid all of the gloom-and-doom headlines, I think it's important to consider what could go right for investors...
I wouldn't say I'm quite as bullish as my college buddy Bill Ackman of Pershing Square, but as he posted on X, the current environment could spell opportunity:
Setting aside Bill's outlook on the Iran war... what businesses might he be talking about? The ones he owns, of course! Here's the list from the 2025 annual report of his European investment vehicle, Pershing Square Holdings:
Among the Magnificent Seven tech stocks, Bill owns three of my longtime favorites – Amazon (AMZN), Alphabet (GOOGL), and Meta Platforms (META) – all of which I continue to recommend.
I also like the other tech stock he owns, Uber Technologies (UBER), about which I've written positively many times (archive here) and did a deep dive on in my March 2 e-mail.
3) These next two charts of the S&P 500 Information Technology Index reinforce my view that many large-cap tech stocks are downright cheap today...
The first, posted on X by Charles Schwab's Kevin Gordon, shows that the sector's forward price-to-earnings (P/E) multiple has declined in the last five months. It has gone from 31.7 times to 20.2 times – a level not seen in more than three years:
The second, posted on X by investor Antonio Linares, shows that the sector's forward P/E multiple relative to the S&P 500 Index is at its lowest level since 2019:
The changes going on in the tech space thanks to AI are creating massive shifts – not just throughout the industry itself, but in all aspects of our culture and society.
For many people, these changes are traumatic. But for those who learn to harness them, they'll create huge opportunity...
In my latest presentation, I dive deep into what I see going on around us and the root causes. I also explain the strategy I'm taking to stay ahead of these changes and help investors profit from what's to come.
Click here for all the details.
4) As someone who is doing his best to fight Father Time, I was greatly interested to read this study from the Yale School of Public Health.
It challenges the notion that aging means physical and cognitive decline. And it finds that many older adults improve over time, with mindset playing a major role:
Analyzing more than a decade of data from a large, nationally representative study of older Americans, lead author Dr. Becca R. Levy, PhD, a professor of social and behavioral sciences at the Yale School of Public Health (YSPH), found that nearly half of adults aged 65 and older showed measurable improvement in cognitive function, physical function, or both, over time.
The improvements were not limited to a small group of exceptional individuals and, notably, were linked to a powerful but often overlooked factor: how people think about aging itself.
Best regards,
Whitney
P.S. I welcome your feedback – send me an e-mail by clicking here.