What happened

Week to date, shares of Paramount Global (PARA 0.37%) (PARA.A -0.50%) are down 26%, according to data provided by S&P Global Market Intelligence. The media leader reported earnings results for the first quarter that came in below the Street's estimates. 

The company also announced an unexpected cut to its dividend, which sent the stock down. But with management targeting a return to earnings growth in 2024, could this be a buying opportunity?

So what

The dividend cut signals challenges the company is facing as it tries to prep its media assets for a digital future, while satisfying investors that it can stay profitable.

Total revenue fell 1% year over year, driven by lower revenue in the TV media segment (CBS) offset by a 39% year-over-year increase in direct-to-consumer revenue (Paramount+, Pluto TV). 

However, Paramount continued to report weak profitability due to investments to support streaming content. Adjusted earnings per share fell 85% to $0.09 in the quarter. All in all, the double-edged sword of cash outlays for content and weak ad revenue has created a financial dilemma for the company, which led to the dividend cut.

Now what

While the market is pricing in expectations for more of the same in the near term, it is a good sign that the more content Paramount is releasing on streaming services, the more subscribers it is adding.

Paramount+ added 4.1 million subs in the quarter, bringing the total to 60 million. This growth was credited to several new releases hitting the service, including last year's blockbuster film Top Gun: Maverick.  

Moreover, management has called this year a peak investment year, with plans to return to earnings growth in 2024. As Paramount shows progress on the bottom line, the stock could bounce back.

However, investors should note that the recent writers strike in Hollywood presents more uncertainty for the business in the near term. It might be prudent to wait on the sidelines for now before pulling the trigger.