Bank of America analysts have lowered their price target on Paramount Skydance Corp (NASDAQ:PSKY) while reiterating an ‘Underperform’ rating, pointing to near-term uncertainty surrounding the company’s planned acquisition of Warner Bros. Discovery Inc (NASDAQ:WBD, XETRA:J5A).

In a note on Tuesday, the bank reduced its price objective on Paramount Skydance to $11 from $13. Shares traded almost 8% lower at about $10 on Tuesday afternoon.

The bank’s analysts wrote that Paramount Skydance recently announced a definitive agreement to acquire Warner Bros. Discovery, a transaction that would create one of the largest media companies in the industry. The combined entity would bring together major studios and intellectual property including Star Trek, DC Comics, and Harry Potter, along with a large portfolio of linear television networks such as CBS, CNN, TNT, and Nickelodeon.

According to the analysts, the deal has meaningful long-term strategic potential, but the near-term outlook is complicated by the scale of the integration.

“While in our view the long‑term strategic potential is significant, the near‑term outlook is clouded by integration complexity and transitional uncertainty, especially as PSKY is already in the midst of absorbing the Paramount/Skydance merger,” they wrote.

Under the agreement, the acquisition values Warner Bros. Discovery at $31 per share, with an additional quarterly ticking fee of $0.25 per share beginning after Sept. 30. The transaction implies an enterprise value of about $110 billion, including roughly $81 billion in equity value, or approximately 13.4 times EV/EBITDA for Warner Bros. Discovery.

Bank of America wrote that deleveraging will be a key priority for the combined company. Paramount Skydance expects the new entity to close with net debt to EBITDA of about 6.5 times, with management targeting a reduction to investment-grade levels of roughly 3 times within three years.

As part of the financing structure, existing Paramount Skydance shareholders will have the opportunity to participate in a rights offering alongside the Ellison family and RedBird Capital, which have committed $47 billion in equity at $16.02 per share. However, the analysts noted that public shareholders may be unlikely to participate given the stock’s current trading level near $11.

Paramount Skydance also plans to increase content investment, supported by recent deals for South Park, UFC rights, and an exclusive agreement with the Duffer Brothers for projects beyond 2026. The company is targeting an expansion of film production to 30 releases per year across its two studios while increasing streaming content output.

On a pro forma basis, management is targeting $69 billion in revenue and $18 billion in adjusted EBITDA by 2026, including $6 billion in additional synergies, on top of the previously expected $3 billion from the Paramount-Skydance combination.

“We believe PSKY, particularly with the addition of WBD, has the potential to be a dynamic global media company,” the analysts wrote. “However, mergers and restructurings at this scale take significant time and require investor patience.”