Skydance trades at an unsustainable 10.0 times forward EBITDA given $74.6 billion in net debt and $6.2 billion in annual interest. We initiate coverage with a Strong Sell rating and a $6.50 price target.
Key points
- $74.6 billion in pro forma net debt saddles Skydance with roughly $6.2 billion in annual net interest obligations.
- $121.8 billion enterprise value implies an excessive 10.0 times forward EBITDA despite severe ongoing linear television decay.
- $6.50 target reflects a realistic 8.6 times multiple on $12.2 billion 2027 EBITDA after subtracting debt obligations.
The call
At $9.37 per share, the market values Skydance as if it can seamlessly achieve $6 billion in synergies while linear earnings stabilize. That optimism ignores that annual cash interest of $6.2 billion consumes roughly half of combined pre-synergy EBITDA. The current enterprise value of $121.8 billion requires 10.0 times next-year cash operating earnings.
Pro Forma Revenue, Adjusted EBITDA, and Net Interest Burden ($B)- Revenue ($B)
- Adjusted EBITDA ($B)
- Net Interest ($B)
Source: SEC pro forma filings and analyst estimates, October 2026.
We believe the market is far too optimistic regarding near-term deleveraging and integration execution. Pay-TV cord-cutting continues to strip high-margin affiliate and advertising cash from TV Media, while consent decree mandates lock in elevated theatrical and production outlays. Free cash flow will barely exceed $2.0 billion in 2027 after interest, capex, and transformation expenses.
Implied Share Price vs. EV/EBITDA Valuation Multiple ($/share)Source: Analyst sensitivity model, October 2026. Net debt reflects $72.6B year-end 2027E balance.
Valuation
Skydance trades at an inflated enterprise multiple given its highly levered capital structure. We forecast 2027 Adjusted EBITDA of $12.2 billion, crediting $1.5 billion of realized net synergies against ongoing linear declines. Applying an 8.6 times enterprise value multiple yields a $105.4 billion enterprise value. Subtracting projected year-end 2027 net debt of $72.6 billion leaves $32.8 billion in equity value, or $6.50 per share across 5.042 billion diluted shares. Asymmetry is heavily tilted downward because financial leverage magnifies small operational shortfalls into large equity contractions, while a 3.92 billion share PIPE lock-up expiration in April 2027 caps multiple expansion.
| Valuation Step | Estimate |
|---|
| 2027E Adjusted EBITDA | $12.20 billion |
| Target EV / EBITDA multiple | 8.64 times |
| Target enterprise value | $105.37 billion |
| Less: 2027E year-end net debt | $72.60 billion |
| Target equity value | $32.77 billion |
| Diluted shares outstanding | 5.042 billion |
| 12-month price target | $6.50 |
Risks
- Streaming subscription gains or faster price hikes could outpace pay-TV affiliate fee declines, observable via quarterly DTC ARPU reports.
- Faster-than-projected overhead reductions could accelerate early cash savings, visible through sequential SG&A run-rate disclosures.
- Lower interest rates or debt refinancings could reduce annual borrowing costs, monitorable in corporate debt exchange yields.
What would change my mind
A sustained re-acceleration in organic consolidated free cash flow above $4.5 billion prior to synergy realization would invalidate our cautious stance.