Should You Invest $1,000 in Media Giant Paramount Right Now?

Key Points

• Paramount was just acquired by a tech mogul's family.

• A stock that languished for years has a new lease on life.

• 10 stocks we like better than Paramount Skydance ›

Hollywood is a cutthroat business.

Over the past couple of decades, the old studio system has fallen apart and the carcasses of those legendary film giants picked clean or outcompeted by well-funded, high-tech interlopers like Amazon.com (NASDAQ: AMZN) and Netflix (NASDAQ: NFLX).

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Right now, what a Hollywood studio needs to survive -- and perhaps even thrive -- is oodles of cash and access to new technologies.

That's why an investment today of just $1,000 in Paramount Skydance (NASDAQ: PSKY) might pay off handsomely down the road.

A wealthy new owner

You may have heard that Larry Ellison, the CEO and co-founder of software giant Oracle (NYSE: ORCL), briefly became the wealthiest human on the planet earlier this month. The price of his company's stock surged on great earnings news and sent him ahead of Tesla (NASDAQ: TSLA) CEO Elon Musk for a while.

Skydance Media, a movie production and media company owned by the Ellison family, acquired Paramount last month for $8 billion, creating a new media conglomerate called Paramount Skydance. That deal suddenly gives the aging movie and television production firm a new lease on life -- and a massive injection of cash it can use to compete better.

Paramount is a Hollywood legend. It was one of the original "Big Five" studios in Los Angeles. It produced legendary films such as The Godfather, Chinatown, Titanic, and the Mission: Impossible, Indiana Jones, and Star Trek franchises, among many, many other recognizable films and television shows.

Image source: Getty Images.

Paramount's current portfolio includes:

• Paramount Pictures and Television
• CBS and CBS News
• Nickelodeon, MTV, and BET
• Comedy Central
• Showtime
• Paramount+ streaming

Investors burned

Despite those assets, Paramount stock languished for years before the recent merger. The company struggled to compete in a fast-evolving media industry that needed to adapt to new technologies and changing viewer behaviors.

The stock burned none other than the Oracle of Omaha (different Oracle). Beginning in 2022, Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) accumulated 63 million shares of Paramount, but the stock fell 44% in 2022 and another 12% in 2023. Berkshire CEO Warren Buffett sold the entire Paramount stake in 2024 for a loss.

But with the recent merger, Paramount now has an influx of essentially endless money from one of the world's richest families. It also has a close connection to a major tech firm (Oracle). That's likely to come in handy as new technologies -- from streaming to virtual reality and 3D pictures to artificial intelligence and machine learning -- continue to transform the entertainment industry.

Bold moves

David Ellison, Larry's son and CEO of the new conglomerate, is already using his father's fortune to make bold moves. Those include a recent $7.7 billion deal for rights to Ultimate Fighting Championship content and the acquisition of the rights to South Park.

Ellison is also working on an acquisition of Warner Bros. Discovery, which owns HBO, CNN, and the Warner Bros. movie and television studio.

In an Aug. 7 letter to shareholders and employees, Ellison promised to use cutting-edge technologies "to transform Paramount into a tech-forward company that blends the creative heart of Hollywood with the innovative spirit of Silicon Valley."

Trading at just under 13 times future earnings, Paramount Skydance is a bargain at the moment. The company has a market cap of just under $20 million, about 77% of which is owned by the Ellison family.

If you think technology and money can move an aging movie studio into the future (as I do), and that good things are in store for Paramount Skydance and its shareholders, you should consider an investment today before the shares become expensive.

Should you invest $1,000 in Paramount Skydance right now?

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Matthew Benjamin has positions in Berkshire Hathaway. The Motley Fool has positions in and recommends Amazon, Berkshire Hathaway, Netflix, Oracle, and Tesla. The Motley Fool has a disclosure policy.